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My in-laws have a bit of appreciation in their house. Like from purchased in 1962 for $48,000. Value today in the vicinity of a million. He is in hospice, which we interpret to mean he will shortly be a goner. My understanding is that the house will be reappraised at today's value. MIL can sell it with no capital gains. Is this correct?

Maybe. Maybe not.

Assuming that they are joint tenants with a 50/50 split of ownership, AND they live in a community property state, then her basis will be stepped-up on the entire value of the house. Therefore, when she sells, there will likely be little/no gain, or possibly even a loss because of the costs to sell.

If they are joint tenants with a 50/50 split of ownership and they don't live in a community property state, then there will only be a step-up in value on his 50% when he dies. However, if she sells within 2 years of his death, she can use the full $500k exemption that MFJ couples are eligible for, which would likely exempt the rest of the gains.

If only his name is on the deed, then whoever the heirs are will get a step-up in value on the entire value of the house. But it depends on his will, or, if he doesn't have a will, the laws of the state, who the heirs will be, and therefore, who will be able to sell the house.

There are probably a lot of other possible scenarios, depending on exactly how the house is titled and where they live, but these are probably the most common.

AJ
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