USA Estate and taxes question


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I'm not an attorney or accountant, so forgive me if I don't use the correct terminology everywhere. All of this is happening in the state of South Carolina.

Here is the situation: my mother and father bought a house 24 years ago. The deed was NOT set up as "joint tenancy with right of survivorship." Both Mom and Dad were listed on the deed as owners. Mom had a stroke 20 years ago, and Dad cared for her and held power of attorney for her until she passed away last year.

Mom died in September of last year, and Dad had a stroke about the same time, rendering his decision-making abilities somewhat questionable. My brother has POA for Dad now, and he and I are helping him with his affairs. My Dad moved in with me two months ago because we weren't sure he could safely care for himself. My brothers and I decided to sell his house since neither he nor we no longer need it. The sales price is $160k with an outstanding mortgage of $80k. Prior to the closing, the closing attorney discovers the issue with the deed. We locate Mom's will, but unfortunately the will, which leaves everything of hers to Dad, doesn't explicitly grant permission to sell the property, necessitating the involvement of probate. Our attorney finds out that we are less than a month away from the one year anniversary of Mom's death, and tells us that we can wait until after the 1 year anniversary and thereby reduce the probate period on Mom's share of the house from 8 months to 1 month or less. He advises us to wait for the 1 year anniversary, then transfer the entire deed to Dad (who is still able to sign documents, etc.). This, in theory, should simplify the sales process.

Here's my main question: what are the tax implications of the sale of the home?
 
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kirby

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Read IRS publication 523. It says for Fed tax, your Dad can exclude $500K of gain from sale of house if he sells within 2 years of your Mom's passing. If you are past that date, then the exclusion is $250K. Either one is more than the $160K sales price. So no tax on sale.
For S. Carolina income tax, that exclusion should also be the same but I'm not sure so someone else will have to speak to that.
 

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