Selling an inherited house.

[goodandbadjapan]

My sister-in-law received a small house as part of her father's legacy. It was an old, small house and she had to pay no inheritance tax as it was within the permitted tax-free allowance. That was a few months ago. She has just sold the house for about ¥6,000,000 and asked the tax office what she would have to pay in taxes. They were vague but said about half a million which seems extremely high to me. Would any tax due not simply be on the gain in value since she took possession of it? In which case it would be zero. Or do they calculate it on the gain since first purchased (which again is probably very little, if anything)?

I suspect she may not have explained the situation very clearly to the tax people and probably made out that she had made a profit of 6 million or something, but if anybody knows the law on this, I'd be very grateful!

Edited to add: Think I found the answer - deduct original acquisition cost and transaction costs from amount received and pay tax on the rest. If she had paid inheritance tax, that too would be deductible, I think.

[RetireJapan]

There is a tax exemption for your main residence I believe, but I guess she's never lived in this one.

[goodandbadjapan]

There is a tax exemption for your main residence I believe, but I guess she's never lived in this one.

She lived in it till she was 6 years old, but never since! It's a very old house.

[Jake]

There is a tax exemption for your main residence I believe, but I guess she's never lived in this one.

I'm not sure there is an exemption. My case is slightly different, but after I sold my house which was my main residence, I received a letter from the taxman asking when I bought it, how much, when I sold it and how much. If the selling price was higher than buying I was told to report it in my annual tax return, if not fill in the details, return the letter and forget about it.

In this case it was an inheritance so **I think** it shouldn't be taxable, but better to check again. If the inheritance was 6 million in cash, nothing more would be said.

It would be a good idea to talk to a tax expert. I received an inheritance in the UK, within the inheritance tax limit but phoned the tax office anyway. The lady on the phone said, and I will paraphrase, "You need to talk to the tax people in the UK, not us". It appears some of the staff haven't got a clue.

[RetireJapan]

This article explains the 30 million exemption to capital gains tax when selling your home, which may also apply to other situations: https://www.home4u.jp/sell/juku/course/sell-60-12215

[Moneymatters]

My sister-in-law received a small house as part of her father's legacy. It was an old, small house and she had to pay no inheritance tax as it was within the permitted tax-free allowance. That was a few months ago. She has just sold the house for about ¥6,000,000 and asked the tax office what she would have to pay in taxes. They were vague but said about half a million which seems extremely high to me. Would any tax due not simply be on the gain in value since she took possession of it? In which case it would be zero. Or do they calculate it on the gain since first purchased (which again is probably very little, if anything)?

I suspect she may not have explained the situation very clearly to the tax people and probably made out that she had made a profit of 6 million or something, but if anybody knows the law on this, I'd be very grateful!

Edited to add: Think I found the answer - deduct original acquisition cost and transaction costs from amount received and pay tax on the rest. If she had paid inheritance tax, that too would be deductible, I think.

Assuming it was technically an empty house when she received it there could be an allowance of 3,000万 upon sale.
If it was built before 1981, she's never had it registered in her name, and no one else has lived there since the succession began.

https://www.home-select1.co.jp/baikyaku ... -sale-tax/

Section 4-2 in that link.
Specifically talks about avoiding both income and residential tax if under the limit after costs.

And let's all just take a moment to gaze in silent wonder at the glory of that URL. "Inheritance-real-estate-sale-tax"
Talk about bait and switch. I couldn't write a better English URL for this topic.

If 4-2 doesn't apply I think the whole page has useful information. But my Japanese is the worst.

[goodandbadjapan]

Thanks - her accountant is looking at the details but seems tax due, in any, will be less than what she was originally told.