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Surviving Spouse Using Homesellers Exclusion |
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Dear Edith: I read your column in the March/April issue of The Real Estate Professional magazine. The letter from the widow, noname, via e-mail titled Sell for $700,000. was so very important to my family at this time. My sister died on Nov. 30, 2006, she and her husband were joint tenants on their home in California for the past 26 years. Do we understand correctly that her husband would have to had sell their house in December '06 to quallify for the $500,000. exemption of capital gains taxes? The house was not in sellling conditiion until he had it all painted, new carpets installed and many repairs done. Then he put it on the market and it was a few months before it sold and closed. Does he only have the $250.000. free of capital gains because his wife died a month before the end of the year prior to the house selling? Does their age enter into the picture? He is 81 years old and my sister was 80 when she died. Since he does not have a computer, please respond to my e-mail:
Thank you for a prompt reply. Regards concerned sister-in-law. |
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The full $500,000 exclusion was available only during the calendar year of the death. But all is not lost. Depending on the way title to the home was held, and the state they lived in, the surviving spouse usually has a new cost basis for the house. In many cases, there's little or no actual capital gain to be taxed anyhow. I'm not up on all the rules for community property states. But I believe your brother-in-law now has a "stepped-up" cost basis, value as of the time of death or even a bit later. That should give him almost no taxable gain. It's a simple matter to consult a CPA, or the lawyer who's handling the estate. |
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Edith
Originally published on May 31, 2007 |
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