Re: Taxation on sale of property

For federal income tax purposes, she gets a step-up basis equal to the fair market value of the house as of the date of the boyfriend's death. Therefore, if she sells it now, she should have no gain, except for the possibility of any appreciation between the date of his death and the date of sale.

Re: Taxation on sale of property

There are several of issues inherent in your question. First, your mom may actually qualify for the Section 121 exclusion (the provision that allows a taxpayer to exclude up to $250,000 or $500,000 of gain on the sale of a house), assuming that 1) Montana law provides for common law marriage and 2) you can prove that she was married as defined by Montana law. If that were the case then she may have been a part owner (either by being married when it was purchased or on the appreciation that occurred during the marriage). This might be worth investigating.

Second, your mother should have received a stepped-up basis in the property. She should only have taxable income to the extent the sales price exceeds her basis. So if the basis was stepped up to the value on the date that her boyfriend passed away, she should have little gain on its sale.

Buying another house within a year would probably not have any benefits, unless the house sold and the house purchased were used for business purposes -- not residential purposes.

Nothing in this post should be considered tax or legal advice. You should contact your tax advisor to discuss the particulars of your situation.

I hope that helps.

Kreig Mitchell, Esq.