capital gains

Forum|Forum|2 years ago
February 16, 2024
1 reply
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In 2017, my brothers and I purchased my parents house (for $1.00) with life use. My parents passed and we sold the house. Are the proceeds considered a second residence that we would owe capital gains on? And if so, We don't know the fair market value of the house when we bought it, so how can we find that information? Thanks for you help

TomD8

Employee

[Edited reply]

"...with life use."

If the parents retained a life estate in the property, and it was sold after their deaths, then the property receives a "step up" in basis to its fair market value at the time of the life tenants' death. That means that the capital gain when the house is sold would be the sale proceeds less the stepped-up cost basis. That capital gain (if any) would be taxable to the remaindermen.

You may want to seek the help of a local tax professional with this.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.