I am the sole heir and executor of my late step Dad's estate. I sold the house as is for 155,000.00 and there waere two accounts totaling 20,000.00 plus two CDs totaling $8,000.00. Do I pay taxes on this? The estate tax is in IL and I live in CO. Also, if I give my brother and sister each $25,000.00 will I have to pay a gift tax on this? Thanks

You'll have to pay inheritance taxes on the cash accounts and gift taxes on whatever you give away. When you sold the house for $155,000 you should have to pay any taxes on whatever outstanding liens were satisfied from the proceeds of the sale. Only the profit, if any, would be subject to taxation.

First off, it seems that the total value of your Dad's estate is under the threshold for owing any estate tax or for having to file an estate tax return. However, as executor you will have to prepare income tax form for your father's estate, which may include income earned from the CDs and possibly capital gains on the house sale (although probably no taxes to be paid on a house sale of this relatively small amount). If you gift $25K to each of your siblings then there can be implications with respect to gift taxes and the effect on your lifetime exclusion - these are gifts from you, not your Dad. It would be less risky and simpler to spread these gifts out over a period of years so that the amount to any you give to any one person is less than the annual gift exclusion of $12,000. You could give each sibling $12K in 2008 and again in 2009 and a final $1K in 2010 without any tax implications. And if your siblings are married, you can double the annual gift to $24K by gifting the amount to both your sibling and spouse.

Agreed; ebaines covers the topic well.

BTW, there are probably no STATE inheritance taxes due either, a sthey normally key on the same exclusion level that the federal estate tax uses.