Hello, i am trying to get some information about capital gains on a house that my girlfriend got when her mother passed away. she has lived in the house for 2+ years now but has only recently finished probate to receive the deed to the house. when the house was apprised for probate it was appraised at 450K. this means that she will not have to pay capital gains on as she is listing the house for that same amount seeing as she got it due to a death the value of the house is based on that alone and not the fact that her mother purchased it for 150K in 1980ish when the house was originally purchased. does her living in the house the last 2+ year matter if she did not have the deed as it state you have to own the house and live in it for 2 out of 5 years? thanks in advance for any help.
I'm a little confused by your question so I will try to answer as best I can for a primary residence there is a $250,000 capital gain exemption. Also I believe value should have been reassessed at the time she inherited the property and any gains would be the difference between the selling price and that assessment. Double check with a tax professional to be sure.
Your girlfriend should be entitled to a step-up in basis which would be the value of the appraisal at time of death. In her case - her basis would be $450,000.
Interesting about the section 121 exclusion is that the code section says the person must own and live in it for 2 out of 5 years.
What is the value of the house now?
You may need to reach out to an accountant if there is case-law that suggests that your girlfriend gets to include the period the property was deeded to the estate in her calculation of the 2 of 5 years.