Capital gains tax (California) question.

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  #1  
Old 04-10-18, 11:14 AM
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Capital gains tax (California) question.

My sister and I inherited our grandparent’s house. After my grandmother passed my dad got the house and then added our name to the title. He has since passed.

We still pay a very low property tax rate. The house hasn’t been reassessed to reflect the current market value.

Say it is worth $1M - this is in Alameda County - do we have to pay capital gains tax on it and are there any ways around it?

The house also has a 2 bedroom apartment in he rear. My sister and I both live in the home and have for over 5 years. We prefer to sell it as oppose to staying or renting it out.
 
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  #2  
Old 04-10-18, 12:09 PM
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I suggest getting some specific tax advice, particularly given the potential tax consequences. The issue to address is in determining your "basis" (akin to the holding value for tax purposes). It is quite possible your basis is equal to approximately 1/3 of the market value of the property when your father died plus 2/3 of the market value of the property when your grandmother died. However, if the property was rented there may be an adjustment for depreciation. In addition, you may be able to postpone some or all of the tax by rolling over the proceeds into a new residence.

Best, though, to find someone who can get into specifics.
 
  #3  
Old 04-15-18, 11:50 AM
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Capital gains

Your dad may have screwed up, or maybe not by adding your names to it, I'm not sure so ask a CPA. Let's say your dad owned the house and upon his death the two of you inherited the house. You would get a "step up" in value to the value at time of death. Generally if you sell the house within a "reasonable" time of inheriting, say less than 6 months, your basis is considered to be equal to the sales price.

But, if he died in 2015 you and you're going to sell it now in 2018 you'd likely have to get an appraiser or two to tell you what the "stepped up" value was in 2015 and you'd only pay the gain on any amount over that.

A step up in basis is not just for real estate, it applies to any asset. Let's say your dad left you 100 share of a Fortune 500 stock that he bought in 1940. First it would probably be a lot more than 100 shares now because of stock splits, but your new basis is the closing stock price on the day of his death.

You being put on the title before his death complicates the calculation though. Find a CPA.
 
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