[markst]

My mom is in hospice and doesn't have much longer to live. My first question is should we sell her house before she dies and split it 4 ways between siblings. IF so how would capital gains be handled. Second question is should we wait until after she dies to split it up and of course how is capital gains handled that way ./. Appreciate the help.

[hkstroud]

If sold while you mother is still alive there will be capital gains tax. The capital gains tax will apply to the difference between the cost and the selling price.

If sold after her death, by the heirs, the capital gains tax will only apply to the increased value from the date of inheritance to the date of sale. In other words, the cost "basis" used in computing capital gains tax will be the value at time if inheritance.

If you plan on selling the property immediately after inheritance there will not be any capital gains and no capital gains tax.

If you plan on holding on the property for any length of time be sure to get the property appraised at the time of inheritance and for the highest possible value.

That will minimize capital gains tax if you hold on to the property for a number of years. I suggest that you get the appraisal done regardless of what you plan on doing. While you won't have capital gains tax if you sell immediately you could have a capital loss if you end up selling for less than the appraised value. When it comes to taxes, a loss is a good thing.

[ebaines]

Just to clarify what hkstroud wrote:

If your mother gifts the property to the 4 children she (or her executor after she dies) must file a Gift Tax return with the IRS (assuming that the property is worth at least 4 times the annual gift tax exclusion: 4 x $13,500 = $54K). She won't actually owe any gift tax, unless the value of the property exceeds $1M. The cost basis for each of the 4 children is the 1/4 of her current cost basis, so when you sell you will each owe capital gains tax on your portion of the gain.

It's better to wait. If you were to inherit the property rather than receive it as a gift your cost basis is automatically "stepped up" to the fair market value of the property as of the data of death (or at the executor's option 6 monhs after death). So as hkstroud noted - if you sell shortly after that your capital gans are likely to be just a small amount or perhaps 0. However, if you sell at a loss you cannot deduct the loss - since the property is considered personal (not investment propoerty) and you can't deduct losses on personal property. So in this case a loss would not be a good thing.