.... hope this helps
I am not a tax expert, and I don’t play one on TV, but I think that if there is an inheritance tax the inheritance tax is paid by the estate giving the inheritance to you, not by you. If the estate is below a certain amount there is no inheritance tax.
It probably matters whether the sale was done before the property was transferred to your name or if it was sold before you took possession of it.
Source: Forbes
http://www.forbes.com/sites/ashleaebeling/2014/10/30/irs-announces-2015-estate-and-gift-tax-limits/
Best to be patient and listen carefully to your tax advisor. The IRS may have a booklet about it.
Forbes says estate tax exemption is $5.43 million per estate, so you must have inherited a BIG bunch of assets to owe inheritance tax! Also, inheriting tax-deferred assets such as IRAs requires you to pay taxes at your normal rate unless you roll the IRA into an inheritance IRA. Insurance policy death benefits paid directly to a beneficiary are not part of the taxable estate, and such direct benefits are not taxable to the recipient.
Also, keep in mind that when selling off any inherited property, the basis of the property is its value at the time of inheriting, not when the property was purchased, which means if you sell the property right away, there should be no additional tax on the profits from the sale itself.
(BTW, I’m not an expert; the above is just the way I understand these things, and I might be wrong.)
ESTATE AND INHERITANCE TAX by STATE
When my father passed away he had close to One million in property and stocks which was divided between 4 of us. There was no taxes to pay on it except for property taxes until we got the property sold.
A few questions. First, what state are you in? What state was the deceased a resident? There are a number of factors here to consider. Are you talking about state inheritance tax as opposed to federal estate tax? (I am a PA licensed attorney.)
If I followed your question, the federal estate tax exemption is irrelevant here because it sounds as if you are asking an income tax question. The estate tax exemption relates to federal estate tax and not income tax due on the sale of inherited property. For 2014 the exemption shields the first $5,340,000 of inherited property from estate tax.
Generally speaking, for federal income tax purposes, property inherited has a tax basis equal to the fair market value on the date the decedent died (the basis is “stepped-up”). Taxable income (cap gain) on the sale is then determined by subtracting the tax basis from the sales price.
As I said, that is a general answer. Depending on the type of property there may be an “alternate valuation date” that could be elected. A “special use valuation” for certain closely-held and farm property can also come into play. There are special basis rules related to qualified conservation easements, too.
It’s dangerous for me to give you a definitive answer because there are too many variables and unknowns.
.... hope this helps
There would be no tax on that sale (other than local transfer taxes, etc.).
Get a lawyer. Don’t ask people here about things like this. Get professional advice.
Unless it was a big enough inheritance to require hiring a tax attorney to manage, you should be good to go. We got about $60K from an inheritance and paid zero taxes.