Inherited house with sister

[Vincent Carosso]

I inherited a house with my sister, what’s the best way for me to buy out her portion with minimal taxes taken from her. She has been living there for the last 8 years.

[Lynnette E.]

Several important pieces of information are missing.  When did you inherit the property and did your sister just inherit her share at the same time, or did she already own her share?  

If you and her both recently inherited the property, purchase her half at the value on the date you inherited/date of the previous owner's death.  The death sets the new value for capitol gains purposes.  So then there is no profit...thus no taxes from the sale.

If she already owned it, then she has the tax exemption based on occupancy for 2 out of 5 of the past years.  I am assuming that her portion of the value of the house does not exceed this value, thus no taxes owed.