Q: I inherited my Dad's home when he passed away in 2002. His spouse was given a "Life Estate," with no Life Estate Deed.
I was notified in 2023 that his spouse had deceased. I sold the house in 2023. Do I have to pay capital gains from the fair value of the house in 2002 when my Dad died or when I was able to sell the house last year after his spouse with the Life estate passed?
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A:
In the United States, the basis for calculating capital gains on inherited property is typically the fair market value of the property at the time of the original owner's death. In your case, this would be the value of the home in 2002 when your father passed away. This is known as the "stepped-up basis."
Since the life estate held by your father's spouse did not affect your ownership of the property but only delayed your ability to sell it, the basis for your capital gains calculation remains the value of the home in 2002.
When you sold the house in 2023, the capital gains would be calculated based on the difference between the sale price and the stepped-up basis from 2002. It's important to keep in mind that specific tax rules can be complex and may vary based on individual circumstances.
For a detailed understanding of your tax obligations and potential deductions or exemptions, it's advisable to consult with a tax professional or an attorney knowledgeable in estate and tax law. They can provide tailored advice based on the specifics of your situation and ensure compliance with all relevant tax laws and regulations.
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