Before we start, I am assuming that u201cby legacyu201d you mean u201cinheritedu201d and the question relates to India.Income tax provisions for sale of an inherited property and the accrued capital gains, are different from a property that is obtained through other means, such as outright purchaseThere is considerable confusion over the taxes applicable on the sale of an inherited property. While many think that the money received on sale of an inherited house is fully tax exempt, others feel that it is fully taxable.In reality, there is no tax liability when you inherit the property. However, any profits made on the sale of an inherited property, are taxable as capital gains.Computation of capital gainsA capital gain can either be short term, or long term, depending on the period for which the asset was held.If the inherited house is held for more than 24 month (2 years), it is treated as a Long Term Asset and taxed at Long Term Capital Gains (LTCG) rate on 20.6%. This period of 24 months includes not only the period for which you held the house, but also the period for which it was held by the previous owner/s who had paid for it.For a holding period of less than 24 months, the actual cost of acquisition and any cost of improvement are deducted and the balance amount is treated as Short Term Gains and taxed at the Income Tax slab rate applicable to you. If the combined holding period exceeds 24 months, you get the right to deduct the cost of acquisition and the cost of improvement as enhanced by the cost inflation index multiplier. The cost inflation multiplier is calculated, based on the cost inflation index of the year of purchase and the year of sale.The cost of acquisition will be the amount paid by any of the previous owners, towards the purchase of the immovable property. For example, consider a scenario, where you inherited a house from your father and he had inherited it from his father. If your grandfather had purchased the house for Rs 50,000, your cost of acquisition for capital gains purposes shall be Rs 50,000. Moreover, in case the house was inherited before 1st April 1981, you may substitute the fair market value of the property as on 1st April 1981 for the u2018cost of acquisitionu2023 and apply the cost inflation index multiplier on that value.Calculate your Capital GainsHaving said that, you can avoid Long Term Capital Gains Tax totally by investing the sale proceeds into buying new property.In case the Property sold / transferred is a residential house, and if out of the capital gains, a new residential house is constructed within 3 years, or purchased 1 year before or 2 years after the date of transfer, then exemption on Long Term Capital Gain is available on the amount of investment in the new asset to the extent of the capital gains.It may be noted that the amount of capital gains not appropriated towards purchase or construction of a new house within 3 years may be deposited in the Capital Gains Account Scheme of a public sector bank before the due date of filing of Income Tax Return. This amount should subsequently be used for purchase or construction of house.I hope it helps.Cheers!AB