Inherited 1/2 of house arrgh!

Probably not. You own half the house, your basis in it is half of whatever it was worth when you inherit it. When the house is eventually sold, you'll get half of what it's sold for. Your sister will have the homeowner's exemption on her half since she lives in it, you'll pay capital gains tax on the increase in value, if any, on your half, since you don't. I suppose you could force a sale, but that sounds like it'd be in nobody's interest.

I'd suggest writing up a simple owner's agreement with your sister in which you both acknowledge that you each own half, that she gets to live in it, and in return she is responsible for taxes, utilities, assessments, and all other expenses due to owning the house. Should any of those expenses be unpaid when the house is sold, they're deducted from her share of the proceeds.

If she balks at signing it, you can point out that it makes it clear that she gets to live there and you don't, which is presumably what she wants.

As John notes, you don't have a particular tax problem. You won't incur any tax until the home is sold in any case.

You could force a sale, but you'd have to go to court, and that could cause family problems.

Have you considered letting your sister buy you out with you, in effect, being the lender? You establish a price, then she signs a promissory note and mortgage in your favor. You wouldn't get much at a time, but it would be something. And she would (hopefully) have the motivation to pay you.

If you do that, you will pay tax [regular income] on the interest she pays you (she's required to do that), and the proportion of any increase in value over the date of death value for the principal portion of each payment made [capital gain].

As both John Levine and Stuart Bronstein have mentioned, at some point you are going to need to know what the value of the house was when your mother died. That is going to affect how much tax you pay when the house is eventually sold, or when your sister buys out your share. You should get a professional written appraisal now as of the date of your mother's death. The longer you wait, the harder (and perhaps more expensive) it's going to be to get a retroactive appraisal.

Also, unless your sister is going to buy you out very soon, make sure that a deed with both your names on it has been recorded by the appropriate government authority.

Bob Sandler

Ok, thanks for every ones input. I have an email started suggesting a land contract for 20 years, $24,000 at 6.25%, paying me $175 a month. I want at least 6.25% to give her an incentive to get a mortgage. We did have a realtor do some comparables two years ago, he suggested a listing price of $46,000. Thanks, Mikek

I sold my house 3 years ago for 20% less than two good realtors showed it comping at after a year on the market.

Just saying that the $46,000 might not be close to your house's value.

The last time I sold a property that had been appraised right before sale, I sold the property for 190% of the appraised value.

The most recent property I sold closed at 150% of what the real estate agent suggested for an asking price.

After you sell, if the IRS asks to see how you determined your cost basis, they will want to see a 'qualified appraisal' done by a 'qualified appraiser' valuing the house on the date of your mother's death. Comps done by a realtor a year after her death are unlikely to be considered a qualified appraisal, the realtor is unlikely to be considered a qualified appraiser, and the valuation date is not the date of death.

I totally agree with Mr Sandler's earlier comment of "You should get a professional written appraisal now as of the date of your mother's death. The longer you wait, the harder (and perhaps more expensive) it's going to be to get a retroactive appraisal."