My sister and I sold our childhood home that our father left to us. Because she is the executor, she was paid the full amount but will be transferring me about $75.5K to my account. What can I expect to owe Uncle Sam?
Things to consider:
I am not our dad’s biological or legally adopted son, but he was my ‘Dad’ since I was 6.
Sales tax, realtor, and closing costs have already been deducted before my sister received the full six-figure deposit.
I am in TX, and my sister is in VA.
Our father had no will. My sister is his only biological child, so she was the executor of his estate.
We are extremely grateful to have this life-changing money but want to be sure about any potential taxes before using it.
I have no input on taxes, but I just wanted to say, thank you for posting a question that shows an heir doing right by their ‘sibling.’ Good luck to you both.
Zem said:
I have no input on taxes, but I just wanted to say, thank you for posting a question that shows an heir doing right by their ‘sibling.’ Good luck to you both.
I am not a tax professional, but you will likely owe nothing in taxes. This is a gift from her to you. She will need to file IRS Form 709 for the full value of the gift, which will count against her lifetime gift tax exemption (currently over $12 million). No actual tax will be owed unless she surpasses that lifetime limit.
She may owe some taxes based on the value of the house at the time of your father’s death compared to the sale price (capital gains tax). However, since inherited property gets a ‘stepped-up basis,’ the taxable gain is often minimal. If there is a tax liability, you could offer to cover half of it, but that’s up to you both.
Your sister is incredibly generous to split the house proceeds with you, considering you were not legally named as an heir. That is rare and commendable.
To clarify, executors are not necessarily beneficiaries—they simply handle the estate and distribute assets according to the law. It sounds like your sister was the sole legal heir and is now gifting you part of her inheritance.
You won’t owe taxes on the gift. She must report it on Form 709, but she won’t owe any gift tax unless she has given away more than $12 million in her lifetime.
She may owe capital gains tax on the difference between the home’s value at your father’s death (stepped-up basis) and the sale price. If she wants to split proceeds evenly, she could deduct any capital gains taxes from the amount she gives you. If the house was sold shortly after your father’s death, any tax liability is likely minimal.
It sounds like you weren’t actually a named beneficiary in the will (since there was no will) or on the house deed.
In short, this money is a gift from your sister. She will need to file Form 709 for amounts above $18,000, but this will just reduce her lifetime gift tax exemption. She won’t actually pay taxes on the gift unless she exceeds the $12 million lifetime threshold.
The bigger tax question is whether she owes capital gains taxes. She should consult a tax professional to determine if there was a taxable gain on the home sale.
Your sister should owe little to no tax on the sale due to the stepped-up basis (value of the home at your father’s death). She should consult a CPA to ensure it’s reported correctly.
She will need to file Form 709 for the gift to you, but no tax will be due unless she has given away over $12 million in her lifetime. Filing this form costs around $500–$1000 with a tax professional.
You, as the recipient, owe no taxes and have no reporting requirements.
As an aside, put the money aside for a bit and think about what it means and what it can do for you. Windfalls are easy to spend quickly, but thoughtful planning can make a lasting impact.