There is not an "inheritance tax" at the federal level. There is an "estate tax" applied to the estate prior to distributions. The estate tax return should have been filed/extended nine months after the date of death (March 2005). If the total estate, including the house, farm, and whatever else he had (including any previous taxable gifts), was valued at less than $1,250,000, no return is required and no estate tax is owed.

The basis of the house and farm will be whatever their value was at the time of death. The estate/beneficiaries will have a taxable gain or loss based on whether those items are sold for more or less than that basis.

I understand that this can be confusing. If you need further clarification, please let me know.

jon@jonacpa.com

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