Q: If I was left a house in a quit claim deed, does the house count as inherited? How does it affect capital gains taxes?
My uncle's house was listed in the will, but I thought the quit claim deed signed just before he died 4 months ago would keep us out of probate. I'm going through probate anyway since my name wasn't on some accounts (I am the sole inheritor). I'm trying to sell the house but I don't know whether it counts as inherited and thus whether I'm paying short term capital gains tax on the whole selling price or not. I live in NC and my uncle's house was not my principle residence.
A:
That is quite unfortunate. If your uncle deeded the house to you during his lifetime, as a lifetime gift, then your basis is the same as whatever his basis was (the amount he paid for it plus capital improvements). This is called carryover basis. If the house has appreciated in value since he purchased it, there is very likely to be a sizeable taxable capital gain when you sell the house. The tax on that capital gain will be borne by you.
If your uncle had left the house to you via a will or living trust, it would have received a step up in basis at his death, meaning you could sell it shortly after he passed and would have had no capital gains tax to pay.
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