1031 exchange and inherited property

My brother, sister and I sold our late parent's home.  My sister  resided in the house prior to sale.  My brother and I did not.  My sister  should be exempt from tax liability since she resided in the house for  more than 5 years.  What are the tax ramifications to myself and my  brother?  Please advise.  Thanks,  C

 

Dear C:  When a person dies the heirs receive their property with a new basis equal to the FMV date of death.  This "stepped up" basis eliminates income tax for the heirs if they then sell the property.  That is probably the case in your situation.  However, if a longer period of time has passed and the property has increased in value since your parent's death then income tax would have to be paid on the increase.    Let me know if you need more.

Steve Hickox
Attorney / President