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Will we have to pay capital gains taxes on a property sold after probate?

August 10, 2011


From:  John
Date:  11 Apr 2011
Subject:  Probate Property Tax Question

Hi Michael,

I found your site on the internet when doing a google search. Great site.

...

My wifeís father passed away during 2008. My wife was his sole beneficiary. He had probate estates in California and Nevada.

The Nevada property is rental real estate.

If the Nevada property isnít sold during the probate, will we have to pay capital gains taxes if the property is sold for less than the value when her father passed away in 2008?

Sincerely,
John

Answer

Date:  20 May 2011

Hello John,

The property received a new tax basis (cost to determine gain or loss) as of the date of her fatherís death. The tax basis is the fair market value on the date of death. (Internal Revenue Code Section 1014.)

As rental property, your wife can claim depreciation deductions on the rental schedule. The tax basis is reduced for the accumulated depreciation deductions.

Since your wife is the sole beneficiary and executor, any activity of the estates is taxable on her individual income tax return.

Good luck!
Mike Gray

We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this website was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

Will we have to pay capital gains taxes on a property sold after probate?

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