If someone's mom dies and left her three children her house, then they rent it out for a while, and now one of them is going to buy out the other two, the money these two receive is inheritance money and not taxable, right?Wrong.The inheritance was the 1/3 interest in the house. They are now selling their 1/3 interest to their sibling. Seeing as it was used for rental, it's business property, so any gain on the sale will be taxable. If there's a loss, it's going to be disallowed because the sale is to a related party.--Peter
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