Page 25 - Senior Times South Central Michigan January 2021 - 28-01
P. 25

Ask the
Senior Times - January 2021 Page 25
   MICHAEL B. WALLING
Elder Law Attorney
Author of "Ask the Attorney"
   ANSWER: It depends if you live in it and when you sell it. Because you received your Father’s home through an inheritance, you get what is called a “stepped-up” tax basis in the home. Inheritance means that the owner- ship of an asset passes down when someone dies. Your “stepped-up” tax basis in the home is the fair market value of the home at the time of your Father’s death.
if he bought the home in 1955 for $10,000 and you sell it right now for $100,000; that’s a $90,000 gain! More gain equals more taxes. If you sold it in two years for $150,000, then that’s a $140,000 gain!
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Michael Walling, Special to Senior Times
CAPITAL GAINS TAX
QUESTION: My Father just passed away. He left his home to me. Will I have to pay a capital gains tax on it?
get the stepped-up tax basis. Instead, you would take his tax basis. His
tax basis is how much he paid for his home when he bought it. So
  If you sell the home soon, then it will probably not increase in value from when your father died. This means that there will be no taxable “gain.” The gain just means that it increased in value. The capital gains tax is due when you sell the home. For instance, if your Father’s home was worth $100,000 when he died, and you sold it for $100,000, then there is no gain. So there would be no capital gains tax due. However,
if your Father’s home was worth $100,000 when he died, and you sold it two years later for $150,000, then you had a “gain” of $50,000. That gain is subject to capital gains tax.
The capital gains tax is due when you sell the home.
Remember, the “gain” is subject to capital gains tax, which can be
up to 20%. There are exemptions that can be taken if you live in the home for a period of time. I would advise you to talk to a CPA about the amount of the tax.
  On the other hand, if your Father would have given the home to you while he was alive, then you don’t
Michael B. Walling is an Elder Law attorney with an advanced Master of Laws degree. He manages the Elder Law Center and the law firm of Michael B. Walling, PLC. Mr. Walling is also a part-time Professor at Western Michigan University. Please email any questions to: info@wallingplc.com. This column
is intended for general information purposes only and should not be considered as legal advice to any particular person.
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The best way to give your home to someone, tax-wise, is by inheri- tance. Then they get the stepped-up tax basis. It could save them thou- sands of dollars.
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