estate tax question

[m trunk]

I know this is a rather dumb question, but here goes.

If one inherits a building - commercial or residential - that's apraised
at, say 1,000,000.00 with a 300,000.00 mortgage - is the tax owed based on the 700,000.00 equity or the 1,000,000.00 apraised value.

Thanks.
marty

 

[charlie]

Normally, your tax basis on inherited property is the
net value of the property on the day the owner passes
away ....... that's for federal income taxes. I don't know the rules for inheritance taxes.

Cheers,

Charlie

 

[JWR1945]

If one inherits a building..- that's appraised
at..- is the tax owed based on the 700,000.00 equity or the 1,000,000.00 appraised value.

The estate pays all applicable taxes. You do not.

Typically, there will be interest (or other income) between the time of the death of the owner and when you receive the property. If so, you are responsible for paying taxes on the interest (or other income) that you receive during the waiting period.

Have fun.

John R.

 

[Martha]

Basically, (and this is very basic as there can be a lot of twists and turns with estate tax issues), if someone dies with a taxable estate, the estate tax is calculated on the total value of all assets, less the total of all debt and expenses of the estate. The estate files a tax return and pays the tax out of the estate assets. If on closing of the estate, the building is distributed to you, you get a 1,000,000 basis in the building. Often when a property is encumbered by a mortgage, the estate will sell the property and payoff the mortgage, distributing the net cash to heirs. The estate could also payoff the mortgage with other assets and distribute the building to the heirs. The building with the mortgage still on it could be distributed to heirs, but this would require lender consent (which it might not give) and the agreement of the heirs to assume the mortgage.