? about capital gains tax/inheritance

My dad inherited a house from my grandpa in late 2000 or early 2001. He sold it on Friday (he still has to wait a week and a half or something for everything to be final and get the money though). I know he claimed the house he just sold as a residence before on his driver's license, but I don't know if he ever had that listed as his address on his income taxes. The house sold for $99k, but after the realtor's commission, pay off to the mortgage company, closing costs, etc., who will only get about $58k.

I was under the impression that you don't have to pay capital gains tax if you own a house more than 5 years, or if you live in at least two years. My parents have owned it about 8 years now, but I'm not sure how long he claimed it as a residence, or if the fact that his income taxes never claimed it as a residence would make a difference. He also used that address for his business address where he stores his equipment, so I'm not sure if that will affect something either.

My parents owned their own house before they inherited the one they just sold, so it's not like they were investors or someone trying to make a profit or something, and 8 years is kinda long to wait to sell if you're trying to flip houses anyway. So, my question is: does my dad still have to pay capital gains tax, and if so, how much?

thanks.

Your father inherited the house eight years ago. The value of it then was the basis for his value when it comes to taxes. You could easily see that with today's down market, the value could be LESS than it was when he inherited it. With the costs you outlined, I would just be making a guess, but it sounds like he is taking a LOSS on the house. What is left to him in a will or given to him has a basis of what it was worth on THAT DAY... Not what his parents paid for it, but its fair market value THAT DAY.

So good luck. Ask a local realtor... HIS... what is would have been worth when he inherited it. Hope for the best. If he used it as a business location, it is still a LOSS if it was worth LESS when he sold it. He might make some money off that loss by recovering taxes he has already had deducted from earned income This YEAR... or Next or both... just fill out the forms and if there is loss still after he has deducted all he can deduct this year, move it forward or backward... but be sure to take all the loss off his taxes.