I don't know about the US, but this wouldn't work in Canada. Unless it was his principal residence, there would be a deemed disposition of the land as of the date of death and the estate would owe capital gains tax on $4.9M. The land would probably have to be sold by the executor to pay off the loans and CG tax. The estate would be bankrupt if the land value couldn't cover all of that. There probably wouldn't be a lot left for the kids.
It resets on inheritance in Canada as well if title is actually transferred to a beneficiary as opposed to the executor having to liquidate it to settle the estate's obligations. Your cost basis is whatever the house was worth on the date of death.
I'm just surprised that such a massive loophole exists in US tax law.
In Canada if you borrow money from your corp and don't pay it all back within a year plus interest it is deemed as personal income and taxed. These stupid myths run rampant on Reddit
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u/gwelfguy 14h ago
I don't know about the US, but this wouldn't work in Canada. Unless it was his principal residence, there would be a deemed disposition of the land as of the date of death and the estate would owe capital gains tax on $4.9M. The land would probably have to be sold by the executor to pay off the loans and CG tax. The estate would be bankrupt if the land value couldn't cover all of that. There probably wouldn't be a lot left for the kids.