My 18-year-old son inherited his grandmother's house. His father wants to buy it from him for $1. Wouldn't my son have to pay capital gains tax? The house is in Pennsylvania
Inherited real estate is purchased at a "stepped up" basis. That is for tax purposes the house price is the value at the time of death. So grandma might have bought the house for $20, and the time of her death, if it is worth 550K the basis price is 550k for your son.
If your son sells the house for $1, then that advantage will be lost. There could be a tax liability created when there does not have to be one. The father when he goes to sell the house could have to pay taxes on the difference between $1 and the current value. A pretty dumb move.
A better option would be for your son to rent the home to his father. He could do so for the carrying cost: taxes, and insurance and that should be acceptable by all.