Small real estate inheritance sparks taxation

DEAR BOB: In 2000, my wife's parents both passed away within a month of each other. They left their estates to my wife and her brother. The estate was worth more than $650,000 so they paid estate taxes. Part of the estate was a property in Sarasota, Fla. At the time of the inheritance, it was valued at $1,600. My wife and her brother recently sold that property for $53,000 and split the proceeds. Do they need to pay taxes on the $53,000? How can they avoid paying taxes? – Larry C. DEAR LARRY: The capital gain on the sale of that property was $53,000 minus its $1,600 "stepped-up basis" market value in 2000 at the time of the inheritance. Your wife's taxable share is presumably half of that capital gain. Purchase Bob Bruss reports online. The co-owners could have made a tax-deferred Internal Revenue Code 1031 exchange for another investment or business property of equal or greater cost and equity. However, it's too late now to avoid tax because they received the cash proceeds from ...