View Full Version : Real Estate/ Inheritance Question

07-18-2006, 10:02 AM
I heard a while back that proceeds from one sale of real estate could be re-invested back into another property, hopefully an existing home mortgage, and avoid much of the tax hit from an inheritance. Did I just dream that up? Thanks in advance for any assistance...sid

07-18-2006, 11:46 AM
It sounds like you may be thinking of a 1031 exchange.

In general, this is about like kind exchanges of property such as rental for rental. I'm not sure if it would apply to you or not. All I can suggest is trying a google search for "1031 exchange"

07-18-2006, 01:04 PM
If you sell property at a greater price than you paid for it, you can avoid the cap gains if you re-invest in another property. If you inherited the property, you may still be subject to paying inheritance tax. Selling and buying a different property probably won't help...but I would talk to a tax attorney in your state to make sure.

Gayle in MD
07-18-2006, 01:17 PM
I think ...
You don't pay taxes on inherited property unless it is valued over $500,000.00. You only pay capital gains on the appreciation from the time the relative dies, until the property is sold.

You can take the one time tax exemption on your principle residence, once in your lifetime.

On rental property, and investment property, or even your principle residence, you can avoid (put off) paying C. Gains taxes by re-investing in property of equal or greater value.

DG in Pennsylvania probably knows more about this....


07-19-2006, 04:52 AM
There are several ways to do this. As was mentioned, if you have a rental property and your deductions are almost finished, the best thing to do is a 1031 exchange. This is where you sell the property and buy another property but NEVER touch the money that's profit. A tax attorney will put this in his escrow account until you find another property to buy. You will have 45 days to find a property and 180 to close on it. This will take care of any capital gains. This can be done time and again on this property or any at all. Cap gains won't be paid until you sell the property or your heirs inherit it.
There is a one time exclusion of capial gains on your personal residence. Check with your tax person before doing this to make sure you are doing the right thing.

07-19-2006, 06:02 AM
It can't simply be rolled into the payoff of a primary, non-rental, home and acconmplish an immediate savings is what you are saying? If you don't mind, I may take this to PM DG...sid

07-19-2006, 11:52 AM
I'll try to answer what I can. I just found an article that may help. Whether it can be rolled into a primary residence and create a savings, I'm not sure. A tax person would be the one to ask.


Question: What are the rules on capital gains when inheriting a house?

When children inherit a home, the Internal Revenue Service determines their basis in the property on the date of the owner's death. The cost basis is not the amount the owner originally paid for the house, but the property's fair-market value on the date of the parent's death.
Cost basis is a tax term for the dollar amount assigned to a property at the time it is acquired, for the purpose of determining gain or loss when it is sold. For example, one of the three siblings sold his or her share of a property to be divided equally, he or she must pay capital gains tax for whatever profit made over one-third of the new basis.
Other tax consequences include estate taxes. However, the estate must total $675,000 or more for tax year 2001 before tax issues become a concern. The IRS allow residents to pass on property, cash and other assets worth up to a total of $675,000 for tax year 2001 before charging the heirs any taxes. This figure will rise each year for the next several years.
Regarding the transfer of ownership, quit-claim deeds often are used between family members in situations such as this when an heir is buying out the other. All parties must be agreeable to dropping a name from the title. For more information, consult the IRS's Publication 950, "Introduction to Estate and Gift Taxes." Order by calling (800) TAX-FORM or download from irs.gov..

07-19-2006, 08:17 PM
ok it depends on what type of property it is and what you are using it for. First off, as someone stated, with inherited property, your cost is whatever its value was when the person you inherited it from passed away.......so unless you hold it for a number of years you shouldnt have a gain on it when you sell it, its a wash. Secondly, the rule is no longer you can sell your primary residence once and pay no tax on the gain, now its every 2 years. Third you can only do a 1031 exchange on business or investment property, not on personal property like your house or vacation home.