‘My brother says I’m being greedy’: Mom left the three of us her rental house. He wants to sell, I want the rent. Who’s right?

My mother bought a small brick rental house in 1999 for $135,000. She died in August and left it to my two brothers and me in equal shares. Our middle brother, the executor, had it appraised at $450,000 as of the day she died. The same tenant has been there five years and pays $2,400 a month. Her checkbook shows $5,400 a year in property tax, $2,100 for insurance and about $3,000 in repairs.

I’m 68 and widowed three years. I get $2,300 a month from Social Security and take $2,500 a month from an IRA with about $390,000 left in it. My house is paid off. An extra few hundred dollars a month means I stop watching every grocery receipt. Mom kept that house for 27 years because, she said, a rental pays you while you sleep. Mom would have kept it. I want to keep it.

My younger brother is 64, still working, and earns more than the two of us put together. He wants to list it by spring. He doesn’t want to be a landlord, he doesn’t trust the furnace, and he says a Treasury bill would pay more than the rent with no phone calls. He says the IRS gets it later anyway. When I told him Mom would have kept it, he said I want the income while he and our brother carry the risk. My brother says I’m being greedy. That word is still sitting on the kitchen table.

Our middle brother will go along with whatever is fair. Nobody can tell us what fair is. Who’s right?

Start with the tax, because there is almost none

Your mother paid $135,000 and the house is worth $450,000. Had she sold it in July, she would have owed tax on $315,000 of gain plus 27 years of depreciation. Her death erased all of it. Under the step-up rule, the three of you took the house at its value on the day she died, so your tax starting point is $450,000.

That cuts both ways. Sell now for $450,000 and there is no gain to tax. After a typical 6% in selling costs ($27,000), the three of you split $423,000, or $141,000 each, and each of you books a $9,000 capital loss. Your brother is right that selling now is close to tax-free.

What the rent is worth to each of you

At $2,400 a month the house brings in $28,800 a year. Set aside one empty month ($2,400), property tax ($5,400), insurance ($2,100) and your mother’s repair bills ($3,000), and $15,900 is left. Split three ways, that is $5,300 each, about $442 a month.

The step-up also restarts depreciation. The three of you can deduct the building, about $360,000 once the land is taken out, over 27.5 years: $13,091 a year, or $4,364 each. So each of you reports only $936 of taxable rent.

Now your brother’s Treasury bill. A 3-month bill paid 4.24% on Nov. 9. His $141,000 from a sale would earn $5,978 a year, every dollar taxable. Before tax he is right: $5,978 beats $5,300, and nobody calls a Treasury bill about the furnace.

After tax it turns. Your Social Security and IRA draw leave you about $18,680 of taxable income, inside the 12% bracket. The rent adds about $208 of federal tax, a little more than 12% because extra income pulls more of your Social Security into tax, so you keep $5,092. The bill’s interest adds $1,327 of tax, and you keep $4,651. If his salary puts him in the 22% bracket, the same arithmetic gives him $5,094 from the rent and $4,663 from the bill.

Where your brother is right

“The IRS gets it later” is half true. The depreciation that shelters the rent comes back when the house is sold, taxed at your ordinary rate up to a 25% cap. After ten years each of you would have claimed $43,636. At your bracket the tax on that is about $5,236; at his, $9,600. Any rise in the house’s value is taxed too, though at your income the first $30,770 of long-term gain in a year is taxed at 0%, since a single filer’s 0% rate runs to $49,450 of taxable income in 2026. For him it is 15%. The same house carries a different tax bill for each of you, and that is most of why you are arguing.

He is right about two more things: the value can fall as well as rise, and a landlord at 68 with no spouse to split the calls is doing work no table shows.

Nobody can be made to stay

Co-owners who disagree cannot be forced to stay together. Any one of you can file a partition action, and because a house cannot be cut in three, a court usually orders it sold, after legal fees. More than 20 states and the District of Columbia have adopted the Uniform Partition of Heirs Property Act, which gives the other heirs the right to buy out the one who files, at an appraised value, before any sale.

The verdict

Nobody at that table is greedy. The house pays you a little more than a bill after tax, it pays him a little less than he thinks, and he carries a risk he never asked for. Offer him his third at the appraisal, $150,000, with your middle brother buying half of it with you. Do not fund your half from the IRA in one year: pulling $150,000 would add about $35,000 of federal tax and raise your Medicare premium two years later. A small mortgage on the house, paid by the rent, is cleaner. If the two of you cannot raise it, sell, split $423,000 three ways, and let the word go.

Put whatever you choose in writing: who pays for repairs, who talks to the tenant, and the price for anyone who wants out later. In families like yours, the next fight usually starts with the furnace.

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