Covington, LA asked in Tax Law, Estate Planning and Probate for Louisiana

Q: In Louisiana, does legal usufruct of an inherited house have any affect on capital gains tax when the house is sold?

Under IRS rules, if someone inherits a house but does not live in or sell the house for a number of years, then capital gain tax is due on the increased value of the house from the time of inheritance until the house is sold. Is this rule the same if a child inherits a house from a deceased parent, but the surviving spouse has legal usufruct of the house during this time period or would the usufruct result in no capital gains tax when the usufruct ends and the house is sold?

1 Lawyer Answer
James L. Arrasmith
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  • Estate Planning Lawyer
  • Sacramento, CA

A: In Louisiana, the concept of usufruct, particularly in the context of inherited property, can indeed influence the calculation of capital gains tax when the property is sold. Usufruct is a legal right that allows someone to use and benefit from property they do not own, often seen in situations where a surviving spouse retains use of a deceased spouse's property.

When a child inherits a house and a surviving spouse has a legal usufruct over it, the tax implications can be complex. Generally, for federal tax purposes, inherited property is subject to capital gains tax based on its value at the time of inheritance and its value at the time of sale. However, the presence of a usufruct can affect the ownership status and tax responsibilities.

The specific influence of usufruct on capital gains tax will depend on various factors, including the terms of the usufruct and the duration it's in place. It's essential to understand that the IRS rules on inheritance and capital gains tax may not directly address the unique circumstances created by Louisiana's usufruct laws.

Given the complexities of state and federal tax laws intersecting with Louisiana's unique legal provisions on inheritance, it is wise to seek guidance from a tax professional with experience in Louisiana estate and tax law. They can provide tailored advice based on the specific details of your situation, ensuring both compliance with tax regulations and a clear understanding of any tax liabilities or reliefs associated with the sale of the inherited property.

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