I inherited a house. My CPA says I should sell within a year to avoid capital gains. Is he right?
“We plan to sell it to another family member for the appraised value.”
Editorial perspective
AI-assisted
The one-year guidance appears to oversimplify estate tax rules. When you inherit property, you typically receive a "step-up in basis" to the fair market value at the date of death, effectively eliminating capital gains on appreciation that occurred during the original owner's lifetime. This means selling immediately versus waiting several years shouldn't trigger substantial capital gains tax, provided the property doesn't appreciate significantly after inheritance.
The real consideration involves whether the intra-family sale at appraised value truly reflects fair market value, as the IRS scrutinizes below-market transactions between relatives. If selling to family at a discount, gift tax rules may apply regardless of timing. Additionally, if the inherited property generates rental income or the estate is unusually large, different tax strategies might apply. The blanket one-year recommendation warrants a second opinion, preferably from a CPA or estate attorney specializing in inherited property transactions, as the optimal approach depends heavily on specific circumstances.
Originally reported by Quentin Fottrell
for MarketWatch
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Editorial perspective
AI-assistedThe one-year guidance appears to oversimplify estate tax rules. When you inherit property, you typically receive a "step-up in basis" to the fair market value at the date of death, effectively eliminating capital gains on appreciation that occurred during the original owner's lifetime. This means selling immediately versus waiting several years shouldn't trigger substantial capital gains tax, provided the property doesn't appreciate significantly after inheritance.
The real consideration involves whether the intra-family sale at appraised value truly reflects fair market value, as the IRS scrutinizes below-market transactions between relatives. If selling to family at a discount, gift tax rules may apply regardless of timing. Additionally, if the inherited property generates rental income or the estate is unusually large, different tax strategies might apply. The blanket one-year recommendation warrants a second opinion, preferably from a CPA or estate attorney specializing in inherited property transactions, as the optimal approach depends heavily on specific circumstances.