Home, Land, Property Buying and Selling - Capital gains tax on inherited property
Doityourself.com community forum was created to provide answers to all questions related to home improvement and home repair. Doityourself community can help you find information about how-to topics on small fixes to large remodeling projects. With comprehensive how-to content and expertly moderated community forums DoItYourself.com makes it easy to tackle even the most complex home improvement projects.View Full Version : Capital gains tax on inherited property
earthmothers
11-14-07, 01:55 PM
I inherited my home from my grandparent in 1986. It was asesssed at $200,000 at that time. I sold it a few months ago for $750,000. There were a few capital improvements coming to approximately 10,000. How much tax should I have to pay on this?
joed
11-14-07, 06:10 PM
http://www.taxguru.org/re/primary.htm
DavePearson
11-15-07, 06:01 AM
A tax pro could help you out more I am sure, but if I understand things as written, if you have lived there for 3 of the last 5 years, you are entitled to an exemption of up to 250K (single) or 500K (married), these numbers may have changed.
Your cost basis for the property is zero, plus any improvements/allowable exemptions.
If you do not meet the habitation requirement, you will probably be paying a lot in gains, if you do meet it, you will most likely pay some, but not near as much.
As I said, it would be best to contact a tax attorney to get the real answer on this, I am by no means a pro.
Your cost basis for the property is zero, plus any improvements/allowable exemptions.
If you do not meet the habitation requirement, you will probably be paying a lot in gains, if you do meet it, you will most likely pay some, but not near as much.
As I said, it would be best to contact a tax attorney to get the real answer on this, I am by no means a pro.
slumlordfrank
11-15-07, 07:22 AM
I think Dave Pearson misspoke when he said; "your tax basis is zero". You received a "step up" in basis at the time of your acquisition. You will probably have to justify that $200K figure you used.
I'd take a few days and really think through just how much improvement you've done in the ensuing 21 years. $10K sounds a bit low to me.
Again, if it meets the IRC section 121 definition of "primary residence", (2 of the last 5 years) your bill could be pretty low.
Regardless though you're in the enviable position of selling at a time of RECORD LOW capital gains taxes!
Get a good CPA, find all of your tax records and pay a little bit on the nice gift your grandparents left you.
Frank
I'd take a few days and really think through just how much improvement you've done in the ensuing 21 years. $10K sounds a bit low to me.
Again, if it meets the IRC section 121 definition of "primary residence", (2 of the last 5 years) your bill could be pretty low.
Regardless though you're in the enviable position of selling at a time of RECORD LOW capital gains taxes!
Get a good CPA, find all of your tax records and pay a little bit on the nice gift your grandparents left you.
Frank
DavePearson
11-15-07, 09:22 AM
Frank is right, I was wrong. Pub 551 (IRS) says the cost basis on inherited property is the fair market value at the time of death (or other things, I pasted below).
Inherited Property
Your basis in property you inherit from a decedent is generally one of the following.
The FMV of the property at the date of the individual's death.
The FMV on the alternate valuation date if the personal representative for the estate chooses to use alternate valuation. For information on the alternate valuation date, see the instructions for Form 706.
The value under the special-use valuation method for real property used in farming or a closely held business if chosen for estate tax purposes. This method is discussed later.
The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement. For information on a qualified conservation easement, see the instructions to Form 706.
If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes.
There are several things you can include in any exemption calculation as well.
Inherited Property
Your basis in property you inherit from a decedent is generally one of the following.
The FMV of the property at the date of the individual's death.
The FMV on the alternate valuation date if the personal representative for the estate chooses to use alternate valuation. For information on the alternate valuation date, see the instructions for Form 706.
The value under the special-use valuation method for real property used in farming or a closely held business if chosen for estate tax purposes. This method is discussed later.
The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement. For information on a qualified conservation easement, see the instructions to Form 706.
If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes.
There are several things you can include in any exemption calculation as well.