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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29797
Experience:  Taxes, Immigration, Labor Relations
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I am the executor and sole survivor of my mother s house, i

Customer Question

i am the executor and sole survivor of my mother s house, i put my name on the house 7 years ago and she passed away this week. Would i be able to sell the house for a value under market value (since it is my house) to a relative, have the relative live there for a year and then that said person sell it (as their primary residence) thus avoiding capital gain taxes. I never should have put my name on the house but was advised to my legal counsel???
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

We need to know if the house (or a part of it) was into your mother's estate?
Also it is possible that your mother's name was listed on the title?
Even if your mother was not listed on the title - does the title has a life estate provision for your mother?

Expert:  Lev replied 1 year ago.

That is a condition to use the stepped up basis ....

If the property was included into the decedent's estate according to your state law - that property gets stepped up basis.

If the property was NOT included into the decedent's estate according to your state law - no stepped up basis...

Live estate ONLY affect the situation if that was a retained life estate and the property is included into the estate.


Regarding the basis - following sections would apply
1. Under IRC section 1014(b)(9) - any property that is required to be included in the value of a decedent's gross estate for estate tax purposes shall receive a stepped-up
9) In the case of decedents dying after December 31, 1953, property acquired from the decedent by reason of death, form of ownership, or other conditions (including property acquired through the exercise or non-exercise of a power of appointment), if by reason thereof the property is required to be included in determining the value of the decedent’s gross estate under chapter 11 of subtitle B or under the Internal Revenue Code of 1939. In such case, if the property is acquired before the death of the decedent, the basis shall be the amount determined under subsection (a) reduced by the amount allowed to the taxpayer as deductions in computing taxable income under this subtitle or prior income tax laws for exhaustion, wear and tear, obsolescence, amortization, and depletion on such property before the death of the decedent. Such basis shall be applicable to the property commencing on the death of the decedent.

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Customer: replied 1 year ago.
i am in Ontario (Canada) both my mother an i are on the deed, i am an only child thus the executor and the sole benifficiary of all her assets
Expert:  Lev replied 1 year ago.

Sorry for confusion...
I overlooked that you are in Canada.
In Canada, there is no inheritance tax - instead the CRA treats the inherited assets as a sale at their fair market value immediately prior to death. 50% of any resulting capital gains are added to other income of the deceased on their final return where income tax are calculated.

Certain exemptions are available including the Principal Residence Exemption and the lifetime Capital Gains Exemption.

Specifically see here

When you sell your home or when you are considered to have sold it, usually you do not have to report the sale on your income tax and benefit return and you do not have to pay tax on any gain from the sale. This is the case if the home was your principal residence for every year you owned it.

You you sell that property that is NOT your primary residence - you would be responsible for gain.