Tax Guy: I inherited a lake house, but want to give my share to my sister. How can we do this — and avoid paying taxes?

by | Aug 14, 2023 | Stock Market

Dear Tax Guy, My brother, sister and I inherited a lake house in Texas from my mother, who passed away in 2017. My sister would like to keep it, but my brother isn’t interested in keeping his share, and I would like to sell or transfer my ownership to my sister.

What would be the most tax-efficient way to sell or transfer ownership to my sister? Are there any other issues to consider with selling/transferring ownership? Mixing Family and TaxesDear Mixing, The tax provisions here run deeper than the depths of the lake beside your family’s house. Wading through the tax code is the relatively simple part. Navigating the family dynamics is where the waters could get choppy. First, the taxes. This lakefront real estate has surely been growing in value over the last six years, so you must consider the capital gains for any sale that you and your brother are contemplating. After your mother’s 2017 death, the house’s cost, for capital gains purposes, reset to its market value at the time of her death — in tax-code parlance, that’s known as the “step-up in basis.” Assuming the property has appreciated significantly in value over the years, that could represent a major difference for you and your family. Now you have six years of asset appreciation. That time frame includes the pandemic’s turbo boost for home prices. O …

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