Capital Gain Tax Upon Death

[Brady Ascheman]

Hi everyone, I was under the assumption that when you invest in real estate and you run your real estate through your estate that the capital gains tax dies with you and your heirs can sell the properties tax free upon your passing. I was told by my accountant that this is true, but have been told by some fellow investors that it is not. Any insight into this?

[Randy Rodenhouse]

Short answer is when someone inherits property, the IRS applies what is known as a stepped-up cost basis. You do not automatically pay taxes on any property that you inherit. However, if you sell, you owe capital gains taxes but only on any gains that the property has made since you inherited it.