When you sell property that you inherit, you need to determine how much the property was worth at the time you inherited it (this is the cost basis). If you sell the property for more than it was worth, you will need to pay capital gains taxes on the difference.
The best method to determine cost basis is to get an appraisal now of the property’s fair market value in 2016. You might also use the tax assessment, but those are often low, which would mean a higher capital gain for you and your siblings when you sell the property. A third alternative would be a written statement from your realtor. While this would not have the weight with the IRS of an official appraisal or tax assessment, it would probably pass muster if done in good faith.
To read more about capital gains taxes and inherited property, click here.
Subscribe to the Knowledge Bank.
