I often get questions about taxation at death. I always refer people to their CPA to get an answer! This week, however, I wanted to post a short blog to provide some information about capital gains tax. When you inherit property you get a step up in basis - which means that you probably don't have to pay capital gains tax. This can be a huge benefit.
For example, assume your parents built a family business from the ground up that is now valued at $500,000.00. If they sell it today they will have a tax basis of roughly $0.00. Thus, they will owe capital gains tax, at a current rate of 15% or 20%, on the entire value of the business. That is a big tax bill. If, however, you inherit the business you get a step up in basis to the value of the business at the date of death, or within 6 months of the date of death. This often means no capital gains tax is due. The same principal applies to real estate, stocks and other investments.
Of course, YOU CAN NOT RELY on this simplified blog post as tax advice. You need to talk to your CPA about your specific circumstances. For more information on capital gains tax check out information published by the IRS:
