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Hi,
Someone I know inherited from their mother, along with two other siblings (split even 3 ways) a small amount of money and a house. Way under the amount that would be taxed.

They have split most of the cash in 2009, and couldn't sell the house right away so have rented it out.

I have a few questions if you don't mind and might know the answers. I would appreciate it.

1. The cash is tax free since it's so small. But do they have to claim it on their tax return anyway? And if so, do they each claim 1/3 of the TOTAL amount or just 1/3 of the amount that was distributed? A small amount is still in the trust account sitting there in case any more expenses related to the inheritance comes up.

2. The house - they will be paying tax on the net rental income. But what about when they sell it? Is that tax free just as the cash is? Is it a stepped up basis so that they do pay tax on the profit, if any, but that the basis is stepped up to the time of the Mother's death? If so, how is the basis at that time figured and proven?

Thanks,
RB
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