As stated above, i received a property from my late father that was filed as a transfer on death deed. The house has a mortgage (that I've had to catch up the payments on after becoming an authorized user on the account) and is a rental property in Oklahoma City (I live in Texas). I have not yet decided what I am going to do with the property as the tenants are currently month to month but are interested in resigning per the management company (if anyone wants to offer advice on that it'd be great).

I am curious as to what the current tax implications will be for 2019. Is this considered inheritance and fall under that tax rule or would it be taxed as normal income, ie if i were to sell it?

TIA!

The rental income (minus expenses) is ordinary income.

Your basis in the property is the value of the property on the day of your fathers death because that is when your interest vested. If that was recent, the value should be similar and there should be very little taxes owed if you sell it.

I have no idea about Oklahoma income tax or transfer taxes

Corps_Ag12 said:

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As stated above, i received a property from my late father that was filed as a transfer on death deed.

... and is a rental property in Oklahoma City (I live in Texas).

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You probably already know this, but per the Oklahoma TOD Statute, you've got 9 months to file an Affidavit documenting your father's death and claiming ownership of the property.

Otherwise, the property reverts to the Estate. And, BTW, Oklahoma doesn't recognize a Texas probate.

I just went through this very thing last year.

beerag04 said:

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I have no idea about Oklahoma income tax or transfer taxes

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Beer,

Yeah, I know nothing about the OK Income Tax either, but almost all TOD Deeds are exempt from the Oklahoma documentary stamp (transfer) tax per 68 OS Sections 3201 and 3202.

My plan is to sell the property i think.

Would I be on the hook for capital gains or does it fall under inheritance tax?

You'd owe capital gains. Just not 100% what your cost basis would be in that situation. I'd think it'd be value at time of transfer but there's a chance it was original cost.

It's considered an investment property, so as long as that's not your regular line of business, you will pay capital gains tax on it.

Your basis will be equal to the FMV of the property on the date of your father's death. Assuming this is a small property the tax appraisal for that year should suffice.

Since the property is in Oklahoma, you will owe state tax on the gain. You will also owe state tax on any rental income earned before you sell it.

*I am a CPA, but not your CPA*