My father-in-law just passed away this month. The home that he lived in has been paid for for years. The will stated it should be left to the surviving children. There are 4 boys. They have all agreed to sell the home to my husband for $80,000, meaning we will have to pay each of the other 3 $20,000, for a total price of $60,000. Will we owe any inheritance tax on any of this.

ebaines

Probably not. There is no inheritance tax for the federal government, only estate taxes. If any estate taxes are due they would be paid by the estate, not the heirs, and even then federal estate taxes are only due on estates in excess of $2 million. Some states impose their own estate taxes, and a few have an inheritance tax - what state do you live in?

DOLPHINHEART_21

I live in Minnesota

MukatA

There is no federal inheritance tax in the U.S. For the state tax check at the state website.
For more information read: Your U.S. Tax Return: Tax on Inheritances

ebaines

You're in luck - MN repealed their inheritance tax back in 1979. They do have an estate tax: estates greater than $1million are required to file. If your father-in-law lived in MN and the value of his estate is less than $1 million there is no estate tax due.

ScottGem

This may not be as simple as described. What you need to do is get the house appraised as of the data of your FIL's death. That becomes the cost basis of the house. While there will be no taxes due by the estate, based on what you told us, you have to look at any debts he owed at the time of death. The estate is required to pay those up to the value of any assets of the estate.

Now, lets say he left $10K in debt and the only asset was the house and it was appraised at $72K. That means that each of the 4 heirs will need to declare $2K in income from the sale of the house and have to turn over $2.5K to the estate to pay the outstanding debts.

AtlantaTaxExpert

Scott does bring up some valid issues. However, there is NO need for any of the heirs to declare income on the house.

The estate will simply sell the house to your husband, use the proceeds of the sale to settle any debts, then issue whatever remains equally to the four heirs.

Further, the estate will probably need to file a fiduciary return to report the sale of the house and account for any capital gain or loss.

ScottGem

And ATE caught something I had missed. I was going under the assumption that the estate had already been settled. But clearly that has not been the case.

So your husband has to pay the estate $80K. This is then added to any other assets of the estate from which bills are paid. Anything leftover is then distributed in 4 equal amounts to the heirs (including your husband).