Inheritance Tax
 

Wife is the beneficiary of a house that her step father left her.When she sells this house,will she owe the IRS any inheritance tax?

It depends on the value. For federal tax I believe the cut-off is something like $1.3 million, I think some states also have inheritance/estate taxes. The estate lawyer should know.

Inheritance tax is a card in Monopoly . . . the Federal Estate Tax is a tax on the estate, not the beneficiary.

However, in theory, your wife will have to deal with capital gains, since her acquisition basis (cost) was zero. There are numerous exemptions and reductions of the CGT, so check with a tax expert.

It usually easier if the estate sells the property and you just inherit the money.

No.

Capital Gains taxes YES.
But her cost basis is the value on the day her father died, that is the date 'she' acquired it.
Get an appraisal now to help establish that.
Talk to a tax accountant or attorney.

Inheritance tax is a card in Monopoly . . . the Federal Estate Tax is a tax on the estate, not the beneficiary.

However, in theory, your wife will have to deal with capital gains, since her acquisition basis (cost) was zero. There are numerous exemptions and reductions of the CGT, so check with a tax expert.
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:rolleyes:

None of the above post has any bearing whatsoever on your Q, other than "check with a tax expert."

There is NO inheritance tax due to the IRS on a home. Period.

Thanks for all of your help. Our account will be back from vacation on Monday,i will find out then.

There is no such thing as a federal "inheritance" tax. Only a US EState tax.
She will not owe the IRS any estate tax. Depending on the size of father's estate, not yet disclosed, and depending on year of death, estate taxes may be due or have adlready beed paid. That is the responsiblility of the executor as a general rule.

Moving on to possible state estate or inheritance taxes.

Would she owe any state taxes?
Answer: Maybe! It depends on state law where father was domiciled and also state law where the real property is located.

If your father in law was a GA resident and the property was located in GA, you/she are home free. GA has neither an inheritance nor an estate tax:

https://etax.dor.ga.gov/inctax/webfaq/faq-est.aspx#1

Q. Does Georgia have an estate tax? Does Georgia have an inheritance tax? How does Georgia's estate tax work? What is the tax rate? How do I compute the tax? Can you send me a Georgia estate tax return or information?

A. Georgia has an estate tax for estates of decedents with a date of death before January 1, 2005 which is based on federal estate tax law. Georgia has no inheritance tax, but some people refer to estate tax as inheritance tax. The tax is paid by the estate before any assets are distributed to heirs. It is not paid by the person inheriting the assets. Georgia 's estate tax is based on the amount allowable as a credit for state death taxes on the federal estate tax return (Form 706). Use the tax table in the federal instructions to compute the credit. The amount paid to Georgia is a direct credit against the federal estate tax. Click here to go to the IRS’ website.

The Economic Growth and Tax Relief Reconciliation Act (“EGTRRA”) of 2001 (H.R. 1836) modified the estate tax.

For individuals dying in 2002, the state death tax credit is reduced by 25% from the pre-2001 EGTRRA amount; for individuals dying in 2003, the credit is reduced by 50% from the pre-2001 EGTRRA amount; for individuals dying in 2004, the credit is reduced by 75% from the pre-2001 EGTRRA amount; and for individuals dying in 2005 and after the state death tax credit was repealed and replaced with a deduction.

Therefore, for estates of decedents with a date of death after December 31, 2004, Georgia estate tax does not apply to any estate with a date of death that occurred in a year for which the Internal Revenue Code does not allow a credit for state death taxes.

Georgia does not have an estate tax form. You must file a copy of the federal return with payment for the Georgia tax. The due date is the same as the federal due date, 9 months after the date of death. If no Federal estate tax return is required to be filed, no Georgia filing is required. Further information is available from the Georgia Department of Revenue’s Estate Tax Section.

Q. Where do I send the return and anything else related to Georgia estate tax?


A. GeorgiaDepartment of Revenue
Processing Center
P O Box 740320
Atlanta, GA30374-0320


Final point:

Is a Capital Gain tax due on sale by wife.

Answer: It depends!

Most states follow the normal federal rules of "basis". For property inherited, that becomes the fair market value at date of death of decedent. There is a possible exception for 2010 deaths. If his estate was more than 1.3 million, then his exexcutor has the option to select which assests to "step-up" to fair market value. This was the trade off for the 1 year expiration of the federal estate tax. However..........

Congress in Dec brought back the estate tax option for 2010 deaths and gave the estate the option of either skipping the estate tax and keeping the limited 1.3 million step up OR using the new rules which tax estates greater than 5 million and also restores the step up rules to all assets, regardless of value.

First thing to clarify. Does GA use federal basis rules?

If so, determine FMV at his date of death.


Next and most important thing thing to determine. Has the property appreciated in value since he died? Has it depreciated in value since he died

Comparing date of death value to a proposed selling price (less costs to sell) will determing whether you have a capital gain or loss.

The holding period for inherited property is deemed to be long term in all cases. Doesn't matter if he bought the property at 9:00 am and died at 3:00 pm on the same day.


Hope this info is useful to you.

We live in Ga. and the house is in Staten island ny. Total value Approx. 300,000.00

In what state did he reside?
In what year did he die?
Is your wife the executor?
Has the executor submitted interim or final accountings, formal or informal to the beneficiaries?


NY state taxes estates of residents and non residents that have taxable values greater then 1 million dollars.
http://www.tax.ny.gov/pdf/2010/et/et706i_810.pdf
http://www.tax.ny.gov/pdf/current_forms/et/et706.pdf

It is the responsibility of the executor to file all necessary returns and pay all taxes. You should inquire of that person if any tax return was necessary to NY state and if it has been filed?

It seems likely from the attached instructoins that New York follows federal rules regarding basis, so she probably has a fair market value "basis" for income tax purposes.

She may also need a document from the state which would show the state has no interest in the property (from an estate tax point of view). NY apparently has a "Release of Lien" form.
http://www.tax.ny.gov/pdf/2005/et/et117_205.pdf
She probably would have to obtain one before selling the property, but typically, the executor or attorney takes care of this.

In my state, NJ, the state has a similar procedure. They issue "waivers" that have to be recorded with the county clerk and attached to the deed.

Back to income taxes.

She naturally would have to file a NY non resident individual return and report the sale to them in the year sold.

Good luck.

Excellent Info.Would she need to pay more or less by not being a resident of NY?