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Rou · Dec 21, 2006, 09:27 AM

3 sisters inherited mother's house - no mortgage. 1 sisters wants to buy and live in the house. Another sister is willing own 1/3 of house but not live in the house. The sister who will live in the house will buy out the third sister. Question is the sister who owns 1/3 of the house - what taxes is she going to owe and later when the house is sold (2 yrs or more) how is the capital gains going to calculated? Is it better to sell an inherited property in the first year it was inherited?

Cvillecpm · Dec 21, 2006, 09:37 AM

Originally Posted by Rou

3 sisters inherited mother's house - no mortgage. 1 sisters wants to buy and live in the house. Another sister is willing own 1/3 of house but not live in the house. The sister who will live in the house will buy out the third sister. Question is the sister who owns 1/3 of the house - what taxes is she going to owe and later when the house is sold (2 yrs or more) how is the capital gains going to calculated? Is it better to sell an inherited property in the first year it was inherited?

Sister who will live in the home can buy 1/3 share from sister who should have no tax consequence... that sister then 2/3 owner Tenant in Common with sister willing to keep 1/3 share. 2 sisters need written agreement as to who pays what and in what ratio. 1/3 sister - with proper agreement - should offer her 1/3 to 2/3 owner if/when she sells or needs $$$. An attorney should draw up the agreement so that live-in sister pays for repairs, etc but not capital improvements or large expenses like roof replacement.

mjinms · Dec 23, 2006, 10:19 PM

Originally Posted by Rou

3 sisters inherited mother's house - no mortgage. 1 sisters wants to buy and live in the house. Another sister is willing own 1/3 of house but not live in the house. The sister who will live in the house will buy out the third sister. Question is the sister who owns 1/3 of the house - what taxes is she going to owe and later when the house is sold (2 yrs or more) how is the capital gains going to calculated? Is it better to sell an inherited property in the first year it was inherited?

Well, in the end there will only be two sister owing the property. So the taxes would be halved between the two. Prior to that is the sister buys out the one that wants to sell her portion would pay only a third of the taxes at time of sell. Meanwhile all three invested sisters would pay the taxes divided by three. When it comes to buy out sisters portion, get an appraisal worth on the home, two years from now and divide the amound by three.
Example- house appraises for 210,000 divide by 3 (because there are three sissters)and that is 70,000 a sister. So the one that wants to buy her sisters portion would hand over 70,000. Always best to sell property at the end of a year or right at the beginning so the tax portion isn't high.