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RD
RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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Does an estate pay capital gains on its only real ...

Resolved Question:

Does an estate (mother died, father alread deid) pay capital gains on its only real estate, a home bought in 1952 for $6,000.00 and to be sold in 2006 for $90,000.00? Since that home is the only property (real of personal) does the estate need to fill an estate tax return.
Submitted: 11 years ago.
Category: Tax
Expert:  RD replied 11 years ago.

No since the estate is not taxable (below $2 mn. for 2006)...you do not have to file an estate tax return. You also do not have to file New Hampshire estate tax return(below $1 mn. for 2006)


The heirs will inherit the property and the cost basis to the heir will be the fair market value of the property on the date of the death of the mother. The heirs will have to report the capital gain on sale (which will not be much as they get a step up in basis) and pay tax on the gain.


You will also not owe any inheritance tax if you are the son/daughter of the decedent.


Let me know if you have any question.



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Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases.



Customer: replied 11 years ago.
Reply to Renu V's Post: The heirs will not inherit the property because it must be sold to pay debts. The estate must sell the property. That is the reason for the question: does the estate pay a captial gains tax when it sells the property for $90K after buying it for $6K 54 years ago? The estate will file a tax return and the sale of the real estate will be the only thing remotely like income.
Expert:  RD replied 11 years ago.

The estate includes the house at fair market value(step up basis) as of the date of the death so if the house value as of the date of death was $90,000 than that will be the adjusted cost basis and not $6000(paid 54 years ago). So if the house is sold for its fair market value....there is no question of capital gain....and hence no question of any taxes due....However, if there is a gain than you need to file Income tax return for an estate (Form 1041) and report the gain and issue K-1 to each of the beneficiary reporting their share of the gain.


Note that


Every domestic estate with gross income of $600 or more during a tax year must file a Form 1041. If one or more of the beneficiaries of the domestic estate are nonresident alien individuals, the personal representative must file Form 1041, even if the gross income of the estate is less than $600.


Let me know if you have any question.



[email protected]



Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases.




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