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Scenario $1$: Tax Impact of Selling Inherited Property

Sarah inherited a house from her aunt. The aunt's basis in the property was $$150,000.$ The fair market value at the time of inheritance was $$420,000.$

Sarah sells the house two years later for $$480,000.$

Wages: $$60,000$

Interest and Dividend Income: $$1,200$

Itemized Deductions: $$18,000$

Allowable deduction for self$-$employment tax: None

Calculate:

Sarah's basis in the house.

The amount of capital gain she must report.

AGI, Taxable Income, and Total Tax Liability