Taxes on inherited properties

[David Bittorf]

My wife just found out that she may be the heir to a property of a relative that died serval years ago. She, and 3 other family members may split the ownership of the property. My question is - if the property was sold - how would that money be taxed?  Not sure if it makes a difference but the property is in Washington DC and we live in California. 

[Ashish Acharya]

Originally posted by @David Bittorf:

My wife just found out that she may be the heir to a property of a relative that died serval years ago. She, and 3 other family members may split the ownership of the property. My question is - if the property was sold - how would that money be taxed?  Not sure if it makes a difference but the property is in Washington DC and we live in California. 

The property has a stepped up basis At the time of the death. If the property was sold right after it was inherited, then there would be no gain at all. However since three years has already passed,  I am sure the asset has appreciated in value, thus when it is sold now there will be some gain. The gain will be divided between all the parties, And you will pay capital gains tax on it.

Depending on your income level, it might be 0 or 20% (plus 3.8 % of NIIT if you are a high earner).

And you have state taxes.