Will we have to pay capital gains taxes on a property sold after probate?

August 10, 2011

From:  John
Date:  11 Apr 2011
Subject:  Probate Property Tax Question

Hi Michael,

I found your site on the internet when doing a google search. Great site.


My wife's father passed away during 2008. My wife was his sole beneficiary. He had probate estates in California and Nevada.

The Nevada property is rental real estate.

If the Nevada property isn't sold during the probate, will we have to pay capital gains taxes if the property is sold for less than the value when her father passed away in 2008?



Date:  20 May 2011

Hello John,

The property received a new tax basis (cost to determine gain or loss) as of the date of her father's death. The tax basis is the fair market value on the date of death. (Internal Revenue Code Section 1014.)

As rental property, your wife can claim depreciation deductions on the rental schedule. The tax basis is reduced for the accumulated depreciation deductions.

Since your wife is the sole beneficiary and executor, any activity of the estates is taxable on her individual income tax return.

Good luck!
Mike Gray

We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.

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