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Question

Inheritance for the kids?

Forum|Forum|1 year ago
June 28, 2024
2 replies
0 views

So I leave my house to my daughter in 2024 (I'm gone now) . I bought it in 1993 for $150,000. The appraised value was $500,000 when she received it in 2024. She lives in it for 5 years and sells for $650,000. Will she pay CG on her inherited value ($650,000 - 500,000) or my cost value (650,000 - $150,000) ?

Employee

@ohiwish wrote:

...Will she pay CG on her inherited value ($650,000 - 500,000) or my cost value (650,000 - $150,000) ?

The former; it would be the difference between the "inherited value" (the fair market value on the date of death) and her selling price.

Employee

Note that she will pay no capital gains tax (in your hypothetical) if she owns and lives in the house as her principal residence for two out of the past five years leading up to the sale (i.e., she can take advantage of the home sale exclusion, $250,000/$500,000).

See https://www.irs.gov/taxtopics/tc701

Nice thought - thanks

Employee

You seem to be alive, not gone, since you are posting this question,

If you gift the house to your daughter, her basis is your basis, i.e. $150,000 .