Do capital gains taxes even apply in this situation?

Capital gains also applies to long term investments. In this case, it depends on the total valuation of the estate.

The executor has to get a valuation at the time time of death to settle the estate. One of the issues is what the purchase price of the house was and what the value is now. There may be taxes due on the difference. And, depending on the state where the estate is settled, there may or may not be capital gians tax owed on the increase in value of the house.

But this is Lex’s issue to figure out, and she should consult a tax specialist who has experience in settling estates.

Oh Lex has it covered. She has it aaaaallll under control. That’s driving Becky nuts! SHE wants to be in control! But she’d have no idea what she’s doing and she knows it.

Is a house an investment?

If sold for a profit relative to the purchase price, there is $ gain that could be taxed.

They bought it in 1998. It’s on an Island that is also a major tourist attraction. So yeah. There’s going to be a substantial increase in value.

Yes, a house is an investment.

Becky had my oldest daughter in tears today. Nobody can say anything because pissing Beck off would create a whole new slew of problems.
Lex said that once the trust closes the gloves come off!
I said I’d bring the popcorn.

POA ends when the person dies.

I assume Lex is the executor.

If Lex sells the house she might incur a capital gain, but I think the gain is calculated by the market when the person died not back to the original purchase price. It’s called “stepped up basis” if you want to read about it, I don’t know all of the ins and outs.

The house is taxed as an “investment” because it is not a primary home. Primary homes have special tax exemptions. Short term is holding the property under a year and would be taxed at the short-term capital gains tax rates. Long term is holding it more than a year and taxed at the long-term capital gains rate. So, it is usually better to wait a year to sell, unless the seller is in a very low tax bracket and depending on expected market trends. Obviously, an accountant can help with that.

What I don’t know is exactly how it all works when Lex buys you out of your portion; I don’t know how that money is taxed, if it is taxed. There might be some sort of exemption on a certain amount and might vary by state along with needing to deal with federal laws and that probably falls under estate taxes.

This year and next will be interesting tax seasons.

Keep in mind the federal estate tax exemption for 2021 was $11.7 million, so unless the estate was worth more than that, there is no federal estate tax. Not to be confused with the possible capital gains tax if the property is sold. When she buys you out that will trigger a sale I think.

@Dutchess III interesting is understatement to an extreme. These are no decisions for amateurs.

I am not relying on amatures in this situation! Certainly not on the “wisdom” of some of the people on this thread.
Just trying to understand.

POAs die with the grantor. Perhaps you meant executress of a will. You will have to go through probate court. You girls need an attorney.

^^I mentioned about the POA and executor in my first answer.

If there is a will why would they need an attorney?

Becky is still fucking things up. Yesterday Lexy sent out the documents for the sale of the house that all the beneficiaries need to sign and return. The documents were drawn up by an attorney and checked over by a second, independent attorney. We just need to take a picture of the signed page and send it back.
I had to buy a wireless printer and get it set up and that took forever, but I got it licked and got it sent this morning.
Everyone has signed….except Becky. Noooo. She wants to have an attorney look it over. Then she’ll probably send it certified mail, holding EVERYTHING up.
Nobody can say anything to her though.
The last time, when the trust was dispersed, she did all that shit. I asked why she didn’t just take a picture.
She said “If I could just take a picture I would have!!”
I said “Don’t you have a camera in your phone?”
Crickets.

/endrant/

Oy. That is frustrating. Yeah, seems like she doesn’t understand she actually can just take a picture. Hopefully, the delay is just a week or two. It will take 20 minutes for a lawyer to look it over most likely. It’s all very standard. I guess they do a quit claim deed for the property.

I hope it gets done quickly for you.