Will I pay capital gains tax?

If your grandmother is still alive, and she transferred the house to you for $1, she made a gift to you to the extent that the fair market value of the house was more than $1 on the date of the transfer. (I am going to assume for purposes of this discussion that neither your brother nor your sister actually received an interest in the house or paid anything for the house as part of this transfer, since it does not appear from your post that they did. The statement about their being heirs is meaningless in this context.) This type of transaction is called a "part-gift-part-sale" transaction, although in this case it would have been mostly all gift. If you receive property as a gift, you take the same basis for income tax purposes as the transferring person had at the time of the gift. If you pay something for the property as part of the transfer, then you can add what you actually paid to the basis to determine your own basis for income tax purposes. It is NOT treated as if it were an inheritance, because it isn't an inheritance. For it to be an inheritance, you would have to have received the property as a result of your grandmother's death. Your grandmother may have made a taxable gift to you when she transferred the house. In addition, she may have caused problems if she ever needs Medicaid benefits for nursing home care. Here's an example of how to determine your basis if you sell the property: Figure out what your grandmother's basis is. Usually, that would be what she paid for the property (or the fair market value of the property at the time she inherited it, if she didn't buy it but inherited). Determine if any improvements made by your grandmother while she owned it would add to that original basis. Add your $1 payment. If the house was worth more than that basis at the time of the transfer to you, then if you sell, your capital gains would be the difference between that basis and the sales price. If the house was worth less than that basis at the time of the transfer, your capital LOSS will be based on the difference between the value of the house at the transfer date, not the basis. So loss on a gifted property is limited. If you sell and then give your siblings part of the sales proceeds, you will be making potentially taxable gifts to them, assuming I am correct that you are currently the only owner of the house at this point. You really should have consulted someone before doing this transaction, and you really should consider consulting someone NOW before you do anything else.