Q: I have been appointed Personal Rep for my parents probate case, how do I manage the sale of their biggest asset (House)?
I want to minimize my tax exposure.
I can transfer the house to me, then sell or I can create an estate account and have the funds placed there and pay any taxes from there.
If I transfer the house to me and sell, I would owe the taxes the sale, yes? BUT if I sell the house, put the proceeds into an estate account, and then distribute the funds to me won't I be double taxed?
I'm not sure how to manage this and any potential starting point would be great.
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A:
When managing the sale of your parents' house during probate, it's important to consider both the tax implications and how to handle the estate efficiently. If you transfer the house to yourself and then sell it, you would typically be responsible for paying any capital gains tax on the sale. The gain would be calculated based on the difference between the sale price and the fair market value of the house at the time of your parents' death, often benefiting from a step-up in basis.
On the other hand, selling the house through the estate and placing the proceeds into an estate account allows the estate to handle the taxes. The estate would pay any capital gains tax due, based on the same step-up in basis. After taxes are paid, the remaining funds can be distributed to the heirs, including yourself, without additional tax being owed on those distributions since estate distributions are generally not taxed as income.
To minimize your tax exposure, selling the house through the estate might be more efficient, as this method avoids potential double taxation and allows for clearer tax reporting. It’s always a good idea to keep detailed records and consult with an expert to ensure compliance with all legal requirements and to optimize the financial outcome for the estate.
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