Ask Terry Questions inherited share of house – capital gains treatment

inherited share of house – capital gains treatment

By Terry Savage on January 24, 2024 | Housing / Real Estate

Hi, I am co-owner of house that is not my residence. My co-owner has passed and I am inheriting the remaining 50% share. If I sell the property , do I keep the cost basis for my half and use the step up basis for the inherited share? Is my share a long term capital gain and inherited share short term? I will not be eligible for exclusions since I will not be living in the house for a two year period. Thank you.

Terry Says

Check with your accountant, but yes you will get a step-up basis to the value on date of death of the decedent’s half. And if you sell within a few months, there should be no gains to report on that part. (If you’re not going to sell immediately, you should get a written appraisal of the value of the entire house closely after the date of death, so you’ll have a new “cost basis for that half.)

Your half will be treated as a capital gain — and there may be some impact from depreciation if you claimed that (thus see the accountant). But if it was just a simple co-ownership, your half will carry the cost basis on the date you became a co-owner. And if it was over a year, then you would get long-term capital gains treatment.

You obviously know that you don’t get the $250,000 homeowner’s profit exemption since it was not your residence.

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