My wife and two sisters inherited there mothers house last month when she passed away. One would like to sell the other two would like to rent it out. I was told by someone that if they sell this year they would not have to pay any taxes, but if they rent and then sell a year or two from now they will have a big tax bill. Do you have any insight on what they might do?

Because of quirks in the way that the estate tax has been abolished for 2010 only, since your mother-in-law died in 2010 the cost basis of the property for the heirs is set equal to her cost basis, which is likely to be a low value. Consequently when the heirs sell, they will likely owe capital gains on the sale. This is true regardless of whether they sell in 2010 or later. However, the tax rate on capital gains is most likely going to be higher for them in 2011 than it is now; consequently it may be beneficial to sell in 2010 rather than 2011. However, you must balance this against the possible income the property could make if you were to hang onto it. I suggest that your wife and her siblings work up a business plan for keeping the property, and see if the income will pay for the carrying costs (insurance, real estate taxes, repairs, etc), and make enough to be worth the hastle of renting the property out.