My sisters and I recently sold my deceased mother's home. She had a life estate deed, so when she died the property automatically was transferred into her children's names. None of us can claim the property as our primary residence. Are we required to pay capitol gains on our proceeds (minus expenses to sell the house)from the sale of the house? Thank you in advance for your answer.
2 Answers from Attorneys
Sounds like you could use some help from a good estate lawyer. Let me know if I can help you.
It depends on some more information. How did the children get their interest in the home, by gift from Mom or by purchase themselves? If by gift, your "basis" for gain/loss is Mom's original purchase price plus any improvements made by her before the gift and any improvements the children made. Compare this figure to the net proceeds from the sale to determine if there was a gain or loss. Same if you purchased it - compare your cost plus improvements to the net proceeds from the sale to determine if there was a gain or loss. If there was a gain and the property was owned for more than 1 year, the gain is long-term and taxes due on the sale are subject to a special rate. So, if you have a gain, it is reportable and taxes will be due. On the chance it might generate a loss, the loss is deductable as a capital lossproduce some tax benefit.