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In 2008 my father died. 15 years later I just sold the property that I inherited from him. Now I need to pay capital gains on that property, but what do I use as the tax basis?

I could just assume the tax basis is $0 and pay capital gains on the full amount that I sold the house for, but then I'm paying more taxes than I need to since, as I understand it, the value of property, for capital gains purposes, resets to whatever it's worth at the time the person you inherit it from dies.

The state is Texas and the county is Bexar County if that helps. The appraisal district's website has historical information going back to 2019, so that's not super useful.

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    Not an answer but if you lived in it 2 out the last 5 years and the sale price is less than 250k or 500k if you married filing jointly the "gains" are likely exempt from capital gains and writing down 0 might be easier.
    – stoj
    Jul 31, 2023 at 16:41

2 Answers 2

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Two potential sources of information:

  1. Your father's estate tax returned filed when he passed by the executor. The executor may have a copy, the accountant who prepared it might, or you can request it from the IRS.

  2. Appraisal. You'll need to find an appraiser who'd do a "historical" valuation for the specific date.

Tax records may not be very reliable of precise, but still can be used to support whatever number you're claiming.

Your cost basis is the value you determine using steps 1 or 2, adjusted to your usage (if it was a rental, it is decreased by the depreciation allowable; if you made improvements - it is increased by the amounts spent; etc).

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    The appraisal from the Bexar County tax assessor-collector is what to look for. Texas doesn't have an estate tax, and the federal estate tax in 2008 doesn't apply unless the total estate was over $2 million. OP doesn't say. Although the house had to go through probate, Texas probate generally doesn't require an accounting unless the will requires it, and estates are usually not closed after going through probate. They remain open and just fade away like old soldiers.
    – Wastrel
    Jul 31, 2023 at 15:10
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In many places the easiest answer to determining its value in any given year is to look at the property tax assessment. Not all; some places skew the assessment as a way of adjusting the tax rate. This is usually available from the town clerk's office or equivalent.

The question is which year to use --year the property was purchased or year it was inherited. I'm not sure Texas uses the same rule as federal taxes so I'm going to stop here and leave the rest for someone else.

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    Texas doesn't have a state income tax, thus no rule.
    – JohnFx
    Jul 30, 2023 at 16:17
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    @JohnFx Property tax != income tax
    – Barmar
    Jul 31, 2023 at 14:31
  • @Barmar but the question is about income tax. The property tax assessment is being used to determine the value of the house at time of inheritance.
    – Damila
    Aug 1, 2023 at 17:25
  • @Damila They still need to pay federal income tax on the capital gains.
    – Barmar
    Aug 1, 2023 at 17:27
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    @Barmar I think we all get that. I thought JohnFx’s comment was that there is no state income tax so the question of cost basis for state income tax is moot. (About the answer’s last paragraph ) For federal, use the federal rule which is cost basis= value at time of inheritance (simplified for this comment). Sorry if I misunderstood the intention of your comment.
    – Damila
    Aug 1, 2023 at 17:30

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