No. of Recommendations: 1
I don't think this is right at all. The one who buys out the other two has to pay a capital gains tax (if indeed there was a capital gain) based on the difference between the value of the property at the time he inherited it and at the time he sold it.

It seems to me that the two who are SELLING to the one who is buying owe the cap gains tax on the gain on their portion since inheriting it.

The buyer, having paid the inflated price for his 2/3, must pay tax only when selling the property...based on the value of the 1/3 he inherited and the price paid for the other 2/3.

OTOH - in today's market it is extremely possible the house value has decreased instead of increasing since inheritance.

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