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. In 2015, Congress passed a law that, in certain circumstances, requires the recipient’s basis in certain inherited property to be consistent with the value of the property as finally determined for Federal estate tax purposes. If you receive a Schedule A to Form 8971 from an executor of an estate or other person required to file an estate tax return, you may be required to report a basis consistent with the estate tax value of the property. 

Check What's New - Estate and Gift Tax 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 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 What's New - Estate and Gift Tax for updates on final rules being promulgated to implement the new law.

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No, but your mother may be required to report this transaction to the IRS as a taxable gift. Generally, the transfer of any property or interest in property for less than adequate and full consideration is a gift.

On or before April 15 of the calendar year following the year in which a gift is made, the individual making the gift must file a gift tax return (Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return), if any of the following is true:

  • The total value of gifts the individual gave to at least one person (other than his or her spouse) is more than the annual exclusion amount for the year. The annual exclusion amount for 2023 is $17,000 and for 2024 is $18,000.
  • The individual and his or her spouse wish to split all gifts made by each other during the calendar year. (An individual may make a gift of the individual’s own property but treat the gift as having been made half by the individual and half by his or her spouse for Federal gift tax purposes, but only if both the individual and his or her spouse file a gift tax return (Form 709) consenting to this treatment for all gifts made during the calendar year. See Instructions for Form 709 for exceptions to consenting spouse’s filing requirements.)
  • The individual gave someone (other than his or her spouse) a gift of a future interest in property. (A donee has a future interest in property if the donee cannot actually possess, enjoy, or receive income from the property until some time in the future.)
  • The individual gave his or her spouse an interest in property that will end by some future event. (For example, if the individual gives his spouse a life estate in property, the spouse’s interest in the property ends at the spouse’s death.)

Note: If any of the above conditions apply, that individual must file a gift tax return (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.

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