The loss of a loved one is often a difficult and emotional time. The last thing anyone wants to think about when going through this time in life is tax obligations. Unfortunately, in some cases, these are considerations that must be taken into account.
Take property for an example. Those who inherit the family home from a loved one may have questions about how the Internal Revenue Service (IRS) would view a sale. Although the exact answer depends on the details of each individual situation, the following basic rules often apply:
- Value. The first issue to take into consideration involves the value of the home. Generally, those who inherit a family home inherit it at its value at the time of the owner’s death. As a result, those who promptly sell the property generally do not owe taxes on any profit because the IRS would not consider a profit present in the transaction.
- Estate exclusion. Those who inherit property should also take the federal estate tax exclusion amount into consideration. The government often changes this exclusion amount. It is set at $5.6 million in 2018. This means your loved ones can often transfer up to $5.6 million in assets from their estate without owing federal taxes. It is important to note that this exclusion is for federal taxes. In some states a state tax obligation could apply.
Those navigating an inheritance likely have many questions about tax obligations. A failure to properly navigate this area of the law can result in an audit. Those who find themselves the subject of an audit are wise to reach out to Goldburd McCone, LLP for legal counsel to better ensure their rights are protected.