[makocc21]

My mother recently passed and left her house as inheritance for myself and two other siblings. The house was also joint deeded with my sister who is executor of her estate. We are going to closing soon and the title company is going to issue three checks. There is not a lot of money involved but I wanted to know what my tax obligations might be and if there were ways to limit those obligations?

[ebaines]

I am assuming that you and the property are both located in the US. You most likely will owe little or nothing in income taxes on the sale of the property. For tax purposes the cost basis of the property is "stepped up" to equal fair market value as of the date of death of your mother. Then when you sell the property you may owe capital gains tax if the amount you receive in proceeds from the sale is greater than your portion of the cost basis. Given that there are probably expenses such as broker fees, title fees, etc that you will incur on the sale it's highly unlikely that you have a capital gain at all, and hence no tax will be due. Bottom line is it's highly unlikely that you will incur any tax obligation at all due to this sale.

As for either estate or inheritance taxes: you need not worry about estate taxes, because if any estate taxes are due the executor will take care of paying it out of your mother's estate. Some states have an inheritance tax on certain types of heirs, which may apply in this case - tell us what state the property is located in and we can tell you whether there is anything to worry about on that.

[AtlantaTaxExpert]

My esteemed colleague ebaines has covered all of the income and estate tax issues.

I have only one addition. If the sale of the house, after fees and sales costs, does in fact show a profit, the capital gain and the taxes owed would be declared on a fiduciary return (Form 1041) that the estate would file, not on your individual returns.

[ebaines]

Hello ATE - good point. But doesn't this assume that the sale of the property occurred while still part of the estate? If I had to guess you're probably right about that, though it's not clear from the original post whether ownership of the property may have transferred to the children prior to the sale.

[AtlantaTaxExpert]

Unless title was formally passed to the three heirs, a rather complicated process, I believe it is safe to assume that the sale of the house was done while it was still part of the estate.