Dec282025
Probate Q&A Series

Do heirs need to report gain on real property sold after title passed at death? – North Carolina

Short Answer

In North Carolina, real property commonly passes to the heirs or devisees at death, subject to the estate’s administration. If the heirs become the owners and then sell the property (rather than the personal representative selling it as an estate asset), the gain from the sale is generally reported by the heirs, not on the estate’s fiduciary income tax return. The key is who owned the property at the time of sale and who actually signed the deed.

Understanding the Problem

Under North Carolina probate, when a person dies owning real property, does title pass to heirs or devisees such that, if the property is later sold, the taxable gain is reported by those heirs rather than by the estate? The decision point is whether the sale happened after the real property had passed into the heirs’ names (even if still subject to estate administration) versus being sold by the personal representative as part of the estate administration.

Apply the Law

North Carolina treats real property differently from many other assets during estate administration. In many estates, title to real property passes at death to the heirs (if there is no will) or to the devisees (if there is a will), but the property remains subject to the estate’s administration and creditor rights. If the personal representative needs to sell real property as part of administration, North Carolina law provides specific procedures and, depending on the will and the circumstances, may require involvement of the Clerk of Superior Court and sale procedures that include an upset-bid period.

Key Requirements

  • Ownership at the time of sale: Gain is generally reported by the person or entity that owned the property when the sale closed (the seller on the deed), whether that is the heirs/devisees or the estate through the personal representative.
  • Authority and proper conveyance: If a personal representative sells, the personal representative must have the legal authority to convey title (for example, power of sale in the will or court authorization where required).
  • Administration timing limits for heir sales: Heir/devisee conveyances within a certain period after death can be ineffective against the estate’s creditors or personal representative unless statutory conditions are met, which can affect whether the heirs can validly sell without the personal representative joining in.

What the Statutes Say

Analysis

Apply the Rule to the Facts: The facts describe a parcel of real property that “passed directly to heirs before sale,” with the personal representative handling other estate tax reporting. Under North Carolina’s approach to real property at death, that setup usually means the heirs/devisees were the sellers on the deed when the property was sold, so the gain would be reported by those heirs (or by the estates of heirs who predeceased and whose shares pass through their own estates). By contrast, if the personal representative had sold the property under a power of sale or a clerk-approved sale process and signed the deed as personal representative, the estate would typically report the sale on the estate’s fiduciary income tax return.

Process & Timing

  1. Who files: For a sale after title has passed, the heirs/devisees (or their own estates if an heir died) handle reporting associated with their ownership; the personal representative handles the decedent’s final return and estate fiduciary returns for estate-owned income. Where: Probate administration runs through the Clerk of Superior Court in the county where the estate is administered. What: If a personal representative must sell real property without a clear power of sale in the will, a petition and clerk involvement may be required; judicial sale procedures can apply. When: Where a court-ordered sale is required, North Carolina procedures commonly include an upset-bid period (often 10 days) after a reported sale.
  2. Confirm how title was handled before closing: review the recorded deed into the buyers (to see whether the grantors were the heirs/devisees or the personal representative) and any estate file documentation showing whether the clerk authorized a sale or the personal representative joined in the deed.
  3. Coordinate the probate accounting with the closing and distribution: even if heirs report the sale, the estate administration may still need to address liens, claims, expenses, and the timing of distributions, especially where a deceased heir’s share passes to that heir’s own estate.

Exceptions & Pitfalls

  • Personal representative involvement changes the reporting: If the personal representative signs the deed under proper authority and sells as part of administration, that can move the sale from “heirs sold it” to “estate sold it” for reporting purposes.
  • Creditor/administration timing issues: North Carolina rules can limit the effectiveness of heir/devisee transfers during administration unless required notices have occurred and, in many cases, unless the personal representative joins in the conveyance. A closing handled without the right signatures can create title and administration problems.
  • Do not treat probate guidance as tax advice: Income tax reporting of gain depends on federal and state tax rules (including basis and reporting forms). A probate plan should be coordinated with a tax attorney or CPA so the reporting matches the deed, settlement statement, and the estate’s fiduciary accounting.

Conclusion

In North Carolina, when real property passes to heirs or devisees at death and the heirs then sell it, the heirs (or the estates of deceased heirs) generally report any gain because they are the owners and sellers at closing. If the personal representative sells the property under proper authority, the estate typically reports the sale on the fiduciary return instead. A practical next step is to confirm who signed the deed and whether the Clerk of Superior Court authorized or required any sale process before reporting the transaction.

Talk to a Probate Attorney

If a North Carolina estate includes real property sold after death and there is uncertainty about whether the heirs or the estate should report the sale, our firm has experienced attorneys who can help sort out title, the personal representative’s authority, and the court process so the reporting matches the transaction. Call us today at (919) 341-7055.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.

Category: Probate Q&A Series

Author: jpierce

Attorney Jared Pierce is the founder of Pierce Law Group in Raleigh, North Carolina, a firm he established with a dedicated focus on probate administration and estate planning across North Carolina. Born and raised in the Republic of South Africa, Jared moved to Durham with his family in 2001, bringing with him a rich cultural background and a distinctive accent that often serves as a conversation starter.