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My grandfather passed away in 2011 and my father inherited his house. We are looking to sell the property now and are concerned with capital gains taxes. The property has a market value of around $350,000 to $375,000 in NY.

Things that someone might need to know:

  • Grandfather was the last person to live in the house and nobody has occupied it since
  • The house is solely in my father's name
  • Father lost his job in 2012 and is currently unemployed
  • Mother is working full time
  • Mother and father are married
  • Current household income is likely in the $60-70k range (including unemployment, though that is a guess)
  • The house is in NY and so are we

Can anyone estimate what the capital gains taxes would be in our situation?

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Nothing of the data you provided (except for the current value) is relevant. You need to find the estate tax return filed on behalf of your grandfather's estate and see what was the value of the house in the estate. That would be your cost basis (unless your grandfather's cost basis is higher). Your capital gains will be calculated based on that.

I'd suggest (again...) working with a professional. Especially if you didn't understand a word in the previous paragraph.

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    Had the house been sold right after grandfather passed, and if the estate were below the $5M limit, no tax would have been due on sale. The question is whether it went up in value since the inheritance. But, you are correct, we are needing more info, and a pro is advised.
    – JTP - Apologise to Monica ♦
    Feb 2, 2013 at 3:02
  • I provided that info because from the research I did, it sounded like each of those (whether combined or independent of one another) played a role in determining the taxes. In any case, after his death the house was valued at $395,000 in the estate. For various reasons, I am trying to get a rough idea of what the taxes would be when\if the house was sold on the market. When we actually DO sell it, obviously a pro would be involved.
    – Bryan Migliorisi
    Feb 2, 2013 at 7:06
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    @BryanMigliorisi then its easy. $0. You're selling at a loss.
    – littleadv
    Feb 2, 2013 at 7:22
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There is a case to be made that since it was not occupied, it is not the sale of a personal residence, but investment property, even though not put into use as rental. From a Price Waterhouse quote - "Since you say that the house was not used personaly or converted to rental property, then the inherited property can be considered an investment asset and the loss reported on Schedule D."

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    Publication 17 says " Inherited property. Generally, if you inherited investment property, your capital gain or loss on any later disposition of that property is long-term capital gain or loss. This is true regardless of how long you actually held the property." If the grandfather's home was inherited, then it can be argued that the property that was inherited was not investment property and that the conversion to investment property occurred when the property was transferred to the beneficiary. So the clock starts then.
    – Dilip Sarwate
    Feb 2, 2013 at 20:06
  • Yeah, the OP might have 6-15 years of deducting $3K loss on each...
    – littleadv
    Feb 2, 2013 at 20:18
  • @DilipSarwate - I purposely wrote "there's a case.." to suggest that I can't find a document I'm comfortable offers a definitive answer. When searching on this issue, I'm led to multiple accounting or CPA sites that say it's a deductible loss. I'm not convinced either way just yet. On the other hand, I'm not so quick to walk away from a $40,000 tax deduction.
    – JTP - Apologise to Monica ♦
    Feb 2, 2013 at 20:34

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