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Frequently Asked Tax Questions

Interest, Dividends, Other Types of Income - Gifts & Inheritances

  1. Is money received from the sale of inherited property considered taxable income?
  2. My mother transferred to me the title of her home. Do I need to report this transaction to the IRS?

Rev. date: 09/21/2016

Is money received from the sale of inherited property considered taxable income?

To determine if the sale of inherited property is taxable, you must first determine your basis in the property. The basis of property inherited from a decedent is generally one of the following:
For information on the FMV of inherited property on the date of the decedent’s death, contact the executor of the decedent’s estate. Also, note that in 2015, Congress passed a new law that, under certain circumstances, requires an executor to provide a statement identifying the FMV of certain inherited property to the individual receiving that property. Check IRS.gov for updates on final rules being promulgated to implement the new law.
If you or your spouse gave the property to the decedent within one year before the decedent's death, see Publication 551, Basis of Assets.
Report the sale on Schedule D (Form 1040), Capital Gains and Losses, and on Form 8949, Sales and Other Dispositions of Capital Assets:
Under the new law passed by Congress in 2015, an accuracy-related penalty may apply if an individual reporting the sale of certain inherited property uses a basis in excess of that property’s final value for Federal estate tax purposes. Again, check IRS.gov for updates on final rules being promulgated to implement the new law.
For estates of decedents who died in 2010, basis is generally determined as described above. However, the executor of a decedent who died in 2010 may elect out of the estate tax rules for 2010 and use the modified carryover of basis rules.
Under this special election, the basis of property inherited from a decedent who died during 2010 is generally the lesser of:
Under this special election for estates of decedents who died in 2010, the executor of the decedent’s estate may increase the basis of certain property that beneficiaries acquire from a decedent by up to $1.3 million (plus certain unused built-in losses and loss carryovers, if applicable), but the increased basis cannot exceed the FMV of the property at the date of the decedent’s death. The executor may also increase the basis of certain property that the surviving spouse acquires from a decedent by up to an additional $3 million, but the increased basis cannot exceed the FMV of the property at the date of the decedent’s death. The executor of the decedent’s estate is required to provide a statement to all heirs listing the decedent’s basis in the property, the FMV of the property on the date of the decedent’s death, and the additional basis allocated to the property. Contact the executor to determine what the basis of the asset is.
Report the sale on Schedule D (Form 1040) and on Form 8949, as described above.

Rev. date: 09/21/2016

My mother transferred to me the title of her home. Do I need to report this transaction to the IRS?

No, but your mother may be required to report this transaction to the IRS as a taxable gift to you. Generally, a taxable gift is any property transferred for less than adequate and full consideration.
Generally, an individual must file a gift tax return (Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return) for the year of the gift, if any of the following apply:
Note: If any of the above conditions apply, that individual must file a Form 709 even if a gift tax is not payable. See the Instructions for Form 709 and Publication 559, Survivors, Executors, and Administrators, for additional information on gifts.