My father passed away in May of 2009. My sister and I were the beneficiaries of a retirement fund and a piece of property. Everything was split 50/50. My question is, since taxes were taken out of the retirement check, will I have to pay any additional tax? Also, the property title was transferred to both my sister and I at the close of the succession. We sold the property in November of this year for 42,500.00. I've heard something about capital gains tax being due, I have no idea where to begin. Any suggestions or information would be greatly appreciated. Thanks.

Retirement fund gets same treatment in your hands as it would have got in your father's hand.

Your cost basis of the property is the FMV on the date of death. If you sold property at price higher than your cost basis, you have a taxable long term capital gain. Your U.S. Tax Return: Tax on Inheritances

The executor of the estate should have taken care of filing an income tax return on behalf of your father's estate, as well as any other bills his estate owed. If any taxes were owed, the estate should have paid those taxes ot of the estate's assets prior to transferring the remainder of the funds to you an your sister. So no additional taxes are owed by you (except of course on whatever income you may have earned after you received the funds).

As for the house sale - I believe that since your father died in May 2009 and you sold the house in November 2009, any gain would be considered a short-term capital gain (since you owned the property for less than 1 year). Since this was not your primary home, it is not eligible for the $250K exclusion from capital gains.

ebaines:

All capital gains that results from the sale of inherited property are considered LONG-TERM capital gains, even with the stepped-up basis.

Now, as for the retirement fund, it is possible that he OP and his sister were direct beneficiaries of the retirement fund. If so, and if the fund was funded with pre-tax money, then her and she would have to declare their share of the distribution as taxable income.


Lissalea079:

The complexity of your tax situation screams for professional tax help. Both you and your sister need to hire a competent, local tax professional to advise you on these matters and to prepare your returns, probably for BOTH 2009 and 2010.

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Originally Posted by AtlantaTaxExpert

ebaines:

All capital gains that results from the sale of inherited property are considered LONG-TERM capital gains, even with the stepped-up basis.

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Thanks for this - I wasn't aware of it!

Until about four years ago, neither was I.

Thank you so much for the information. I definitely give up on trying to do any of this myself. The further I get into the research the more I'm finding there is way too much room for error to attempt this without professional help.

Glad to help!