This passed year I sold property that was owned by my deceased husband (in Georgia). His 3 children and I got different portions from the sale. A 1099 was sent to each of us. One of his children just called and is doing their taxes for 2007 and was told they had to pay 20% on this money.

There was a will and it was probated. I thought inheritance tax would not have to be paid on such a small amout. The total was less than $80,000.

Will we really have to pay 20% taxes on this inheritance?
Thanks

There are no taxes due on the value of the estate. If there were they would have been paid by the estate.

However, the value of that property needed to be established at the time of death. Any value over that tax basis is capital gains that is taxed at 20%. For example. Lets say the property involved was valued at $60K at the time of death. It was then sold last year for $68K, a profit of $8K. Each of the four of you would have incurred a $2K Capital Gain on which you would need to pay taxes.

There is something wrong here.

If it was a capital gain, then 20% is too much.

If purple could provide details as to HOW MUCH the property sold for and the percentage cuts, I could give an estimate as to how much the capital gains tax should be.

Any inherited property sold results in long term capital gain or loss.

Agreed, unless the property was sold within one year of the death of the father. Then short-term capital gains would apply.

I suspect that the children are using the original basis for the property, NOT the stepped-up basis which is the FMV of the property when the father died.

No, it does not matter when the property is sold for inherited property. Even if the inherited property is sold after one day of the death, it is still long term gain or loss.

You know, you are RIGHT! I forgot about the exception for inherited property.

I stand corrected!