What tax is owed when my stepfather sells my mom’s home?

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Q. My stepfather wants to sell the house that my deceased mother and he have lived in for the last five years. Her will said my two brothers and I would receive the first $134,000 and anything after that would be split between my brothers, my stepsisters and myself. My stepfather has met someone and she wants to buy the house for $93,000. It’s probably worth $125,000. She is willing to let my stepfather live there with her so he can stop working. How much of the capital gains tax will be for my brothers and me? We all live out-of-state? My stepsisters wound not get anything. What other costs and fees would there be if we sell it to this woman?
— Beneficiary

A. We’re sorry to hear about your mother.

Based on your description, we’re going to assume that your mother was the sole owner of the house in which she and your stepfather lived.

We’re also assuming the seller of the house will be your mother’s estate and not the beneficiaries of the estate or your stepfather.

Based on those assumptions, if the estate sells the house for an amount that is less than its basis, there will be no capital gain to recognize, said Jason Marx, chair of the Tax & Estate Planning and Elder Law & Special Needs Planning groups at Curcio Mirzaian Sirot in Roseland.

“If the house is sold for an amount greater than its basis, the capital gain would be the difference between the amount realized on the sale of the house and its basis,” he said. “The basis of the house would be adjusted to the value as of the date of your mother’s death.”

Marx offered this example: If the basis is $125,000 and the estate sells the house for $93,000, there would be no gain on the sale to recognize. If there is any gain on the sale, the combined federal and state capital gains rate would depend on the amount of income earned by the estate and could be as high as approximately 30%, he said.

“The estate should also expect to incur additional attorney fees in connection with the sale,” he said.

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This story was originally published on Feb. 15, 2021.

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