Selling inherited real estate by conversion division — title, registration and apportioning the capital-gains tax

In short: selling inherited real estate and splitting the cash is "conversion division." The key points are two — even if you register in a representative heir's name and sell, so long as that is for the convenience of conversion and the proceeds are actually distributed as agreed, gift tax is not an issue (the National Tax Agency's Q&A example); and the capital-gains tax on the sale profit is filed by each heir according to their share. Inheritance registration has been mandatory since 1 April 2024, so even when you mean to sell, you cannot skip it. The specific tax amounts and shares are left to a tax accountant and other qualified professionals.

You inherit the family home or an income property, but dividing it in kind among siblings is hard — so you want to sell and split the cash. That is conversion division. This article is for heirs who want to sell real estate and divide the proceeds: the order of the work — representative's name, the sequence of registration, apportioning the capital-gains tax — set out from the Civil Code, the Income Tax Act and the Real Property Registration Act, and from National Tax Agency material. The final tax figures and the legal judgment of shares are left to qualified professionals such as tax accountants and lawyers.

What is conversion division, and how does it differ from division in kind and compensatory division?

There are three broad ways to divide an estate. Article 906 of the Civil Code provides that division of an estate is made "having regard to the kind and nature of the property and rights belonging to the estate, the age, occupation, physical and mental condition and living circumstances of each heir, and all other circumstances." Which type to take is chosen by the heirs within that regard.

Type of division	Content	When it fits
Division in kind	Real estate and deposits are allotted to each heir in their existing form	When there are several easily divided assets
Compensatory division	One heir takes the real estate and pays the others compensation (cash)	When you want to keep the property or keep living there
Conversion division	The real estate is sold and turned into cash, and the proceeds are split by share	When it is hard to divide in kind and no one needs to keep it

Conversion division is the classic "sell the family home and split the cash among the siblings." There is no need to slice the land as in division in kind, and no need for the taker to raise a large sum as in compensatory division. On the other hand, because the work of selling is added, it matters not to mistake the order of title, registration and tax. The judgment of whether to "sell or keep" a family home itself is at selling or keeping the inherited family home; inheriting a rental property, at how to take over an inherited apartment building.

In whose name do you sell (representative sale), and what is the registration sequence?

Real estate cannot be sold while it is still in the deceased's name. To pass ownership to a buyer, you must first move the title to the heirs by inheritance registration. Here conversion division has two approaches.

Method	Form of registration	Points to note
Joint registration	Register in all heirs' joint names, and all sell as sellers	Requires all heirs' involvement and documents; harder if an heir lives abroad
Representative's name (for convenience of conversion)	Register in one representative heir's name, and that heir sells as seller	Procedurally tidy, but unless the estate-division agreement states the "conversion purpose" and the "distribution shares," a gift from the representative to the other heirs may be suspected

Even if you sell in a representative's name, so long as it is for the convenience of conversion and the proceeds are actually distributed as agreed, gift tax is not an issue. This is the approach shown in the National Tax Agency's Q&A example "Inheritance registration for conversion division and gift tax." Conversely, if the agreement is worded vaguely, it may be found that the representative took the property solely and then gifted it to the other heirs. The key is to state in the agreement that "the property is sold and the balance after costs is distributed to each in X/Y shares."

And inheritance registration has been mandatory since 1 April 2024 (Reiwa 6). Article 76-2 of the Real Property Registration Act requires the registration to be applied for within three years of learning that you have acquired real estate by inheritance, and neglecting it without good reason is subject to an administrative fine of up to ¥100,000 (Article 164, paragraph 1). It is not that "you can skip registration because you are selling." Registration is needed precisely in order to sell. The whole picture of mandatory registration is at inherited property registration — by when?. The registration application itself is handled by a judicial scrivener, and the estate-division agreement by an administrative scrivener.

Who bears the capital-gains tax on the money from the sale, and how much?

If a profit (gain on transfer) arises from selling real estate, capital-gains tax applies. Article 33 of the Income Tax Act defines income from the transfer of assets as capital gains. In conversion division, as though co-owned property were sold, each heir files capital gains according to their own share (the proportion acquired). Even where the sale is in a representative's name, if it is for the convenience of conversion, for tax purposes each is, as a rule, treated as having transferred according to their share.

In computing capital gains, the acquisition cost and the acquisition date are carried over from the deceased (Article 60 of the Income Tax Act). As a result, if the deceased held the property for a long time, the long-term capital-gains rate (holding period over five years) often applies to the heirs too.

Category	Who files	Rough tax
Capital gains	Each heir according to their share (as a transfer of co-owned property)	Gain × (rate differs by long-term or short-term)
Acquisition cost / date	Carried over from the deceased (Income Tax Act Article 60)	If the cost is unknown, an estimated cost (5% of the sale proceeds) may be used
Application of special provisions	Judged per person if requirements are met	For the deceased's residence, room for the ¥30 million special deduction for vacant homes, etc.

The specific tax and whether a special provision applies vary with the property and each person's circumstances. Whether acquisition-cost records survive, and whether a residential or vacant-home special provision applies, are matters for a tax accountant. A comparison of selling an inherited vacant home "demolished as vacant land" or "with the old house standing" is at selling an inherited vacant home as cleared land or with the old house.

Common stumbles in conversion division, and when to refer to which professional?

Stumble	What to do	Refer to
Forgetting to write "conversion purpose / distribution shares" in the agreement, inviting a gift finding	Draft the agreement stating the conversion purpose and shares	Estate-division agreement = administrative scrivener / a dispute = lawyer
Putting off registration and passing the three-year deadline	Do the inheritance registration first, even to sell	Registration = judicial scrivener
Assuming only the representative files capital gains	Arrange on the premise each files according to their share	Tax / filing = tax accountant
Heirs cannot agree before putting it on the market	First gather material to decide with a sale outlook (valuation, timing)	Brokerage / valuation = licensed real estate agent
An overseas heir means documents are hard to gather	Arrange signature certificates and other documents for the overseas heir early	Registration = judicial scrivener / agreement = administrative scrivener

What we (the real estate agent) handle is the valuation, brokerage and contract of the sale. The estate-division agreement goes to an administrative scrivener, inheritance registration to a judicial scrivener, the capital-gains filing to a tax accountant, and, where there is a dispute over division, to a lawyer. The whole picture of inherited real estate is at inheritance and real estate consultation.

Who should you consult?

Valuation, brokerage and the sale contract of the real estate are handled by Yotsuba Real Estate Co., Ltd. (licensed real estate agent, Tokyo Governor (1) No. 113304). Preparation of documents such as the estate-division agreement is handled by Yotsuba Administrative Scrivener Office. Inheritance registration is handled by a judicial scrivener, the capital-gains filing by a tax accountant, and, where there is a dispute over division, by a lawyer — each within its exclusive field.

These are independent business entities. You engage each directly. We neither pay nor accept referral fees or introduction commissions. Labour matters go to a certified social insurance labour consultant (opening planned September 2026), engaged by you directly. Consultation is free of charge.

Frequently asked questions

Q. If I sell in one representative's name, does it become a gift to the other heirs?
A. No, as a rule. In the National Tax Agency's Q&A example, where registering in one name is merely for the convenience of conversion and the proceeds are actually distributed as the estate division provides, gift tax is not an issue. This is on the premise that the estate-division agreement states the "conversion purpose" and the "distribution shares." Vague wording risks a gift finding.

Q. Even if I mean to sell, must I register the inheritance first?
A. Yes. Ownership cannot be passed to a buyer while the title is in the deceased's name, so registration is needed to sell. In addition, inheritance registration has been mandatory since 1 April 2024, with application required within three years of learning of the acquisition (Real Property Registration Act Article 76-2). It cannot be skipped even when you mean to sell. The application is handled by a judicial scrivener.

Q. Does the representative pay the capital-gains tax all at once?
A. No. In conversion division, as though co-owned property were sold, each heir files capital gains according to their own share, as a rule. The acquisition cost and date are carried over from the deceased (Income Tax Act Article 60). Confirm the specific tax and whether special provisions apply with a tax accountant.

Q. Which is better, conversion division or compensatory division?
A. It cannot be said in the abstract. If no one needs to keep the property and you want to split the cash, conversion division fits; if one heir wants to keep living there or keep it, compensatory division fits. The tax and funding side — the tax on the gain, raising the compensation — varies with each person's circumstances, so it is safer to compare with a tax accountant. We provide material to judge with a sale outlook (valuation, timing).

Sources (primary)

• e-Gov "Civil Code" — Act No. 89 of 1896. Art. 906 (criteria for estate division — regard to the kind and nature of property, each heir's circumstances and all other circumstances); Art. 907 (agreement / adjudication of estate division). Accessed 28 August 2026.
• e-Gov "Income Tax Act" — Act No. 33 of 1965. Art. 33 (capital gains); Art. 60 (carry-over of acquisition cost and date for assets acquired by gift, inheritance, etc.). Accessed 28 August 2026.
• e-Gov "Real Property Registration Act" — Act No. 123 of 2004. Art. 76-2 (duty to apply for the ownership-transfer registration on inheritance — within three years of learning of the acquisition; in force from 1 April 2024 (Reiwa 6)); Art. 164 (administrative fine of up to ¥100,000 for neglecting it without good reason). Accessed 28 August 2026.
• National Tax Agency Q&A "Inheritance registration for conversion division and gift tax" — where registering in one name is for the convenience of conversion and the proceeds are distributed as the division provides, gift tax is not an issue. Accessed 28 August 2026.

The specific tax on capital gains, the computation of acquisition cost, and whether special provisions such as the ¥30 million special deduction for vacant homes apply vary with the property and each person's circumstances. This article does not assess any individual case. Confirm the tax and filing with a tax accountant, and the legal judgment of shares and division with a lawyer or other qualified professional.

This article is general information. It does not judge or guarantee the feasibility of any particular inheritance/sale or any tax amount. Valuation and brokerage and the sale contract are undertaken by Yotsuba Real Estate Co., Ltd. (licensed real estate agent); preparation of the estate-division agreement and other documents by Yotsuba Administrative Scrivener Office — independent business entities, engaged separately and directly. Inheritance registration goes to a judicial scrivener, tax to a tax accountant, disputes to a lawyer, each engaged directly. We neither pay nor accept referral fees.

About the author

Joji Uramatsu — licensed real estate transaction specialist (Tokyo Governor registration No. 293544) and administrative scrivener (registration No. 25087022). Representative Director, Yotsuba Real Estate Co., Ltd. (licensed real estate agent, Tokyo Governor (1) No. 113304); principal, Yotsuba Administrative Scrivener Office. Kohinata, Bunkyo, Tokyo, about five minutes' walk from Myogadani station. Property and paperwork are put on the same table. Full profile: author page.