Yes, it’s likely that your father will have to pay capital gains on the sale of the New York property, but perhaps not so much because it received a partial adjustment in tax basis when your mother died.
Let’s assume for purposes of example that your parents bought the property for $200,000; that it was worth $400,000 when your mother passed away; and that your father will receive $500,000 after realtor’s fees and other costs of closing.
In that case, $200,000 was the original tax basis in the property. When your mother passed away (assuming she was a co-owner), half the basis was adjusted. So the basis became $300,000 – that is, $200,000 for your mother’s plus $100,000 for your father’s share. So, if the property is sold for $500,000, the capital gain will be $200,000 ($500,000 - $300,000 = $200,000). Your father will not be able to exclude $250,000 of gain because the property is not your father’s primary residence.
Harry S. Margolis practices elder law, estate, and special needs planning in Boston and Wellesley, Massachusetts. He is the founder of ElderLawAnswers.com and answers consumer questions about estate planning issues here and at AskHarry.info.
Subscribe to the Knowledge Bank.
