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Started By
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Real Estate Sale and Taxes
Posted on 8/19/13 at 7:36 am
Posted on 8/19/13 at 7:36 am
Looking for help on a tax question.
I inherited land many years ago and I'm about to sell it and buy a house. Can I avoid taxes by buying another property or am I screwed no matter what and have to pay up to Uncle Sam?
Any help would be greatly appreciated!
I inherited land many years ago and I'm about to sell it and buy a house. Can I avoid taxes by buying another property or am I screwed no matter what and have to pay up to Uncle Sam?
Any help would be greatly appreciated!
4
Posted on 8/19/13 at 7:46 am to Bob Sacamano
Posted on 8/19/13 at 7:52 am to LSURussian
Does that mean I'm screwed? 
Posted on 8/19/13 at 7:54 am to Bob Sacamano
Move a shitty trailer on the land
Change your address to there
Wait two years
Pay no taxes
You're welcome
Change your address to there
Wait two years
Pay no taxes
You're welcome
Posted on 8/19/13 at 7:57 am to Bob Sacamano
quote:
Does that mean I'm screwed?
Nah...it means Poodlebrain is this board's resident income tax expert. He's a CPA who works a great deal with tax planning for his clients. Whatever he says goes when it comes to taxes.
Posted on 8/19/13 at 8:01 am to LSURussian
Thanks! Paging Poodlebrain!
Posted on 8/19/13 at 8:07 am to Bob Sacamano
quote:
I inherited land many years ago and I'm about to sell it and buy a house. Can I avoid taxes by buying another property or am I screwed no matter what and have to pay up to Uncle Sam?
1) If you've owned the property for longer than 2yrs, you shouldn't have to pay any taxes
2) If it was declared as an inheritance, you shouldn't have to pay taxes if its valued under 5 mil
Don't hold me to those two things, but I would imagine both apply in this situation.
Posted on 8/19/13 at 8:10 am to Lsut81
Yes to both of those points. I will have to explore it further but I REALLY hope you are right.
thanks!
thanks!
Posted on 8/19/13 at 8:13 am to Bob Sacamano
quote:
Yes to both of those points. I will have to explore it further but I REALLY hope you are right.
I am 95% sure both of those points count in this situation.
If for some reason they don't, you should only be responsible for the taxes on the difference between what it was valued at when you inherited and what you are selling it for.
Posted on 8/19/13 at 8:15 am to Lsut81
quote:I'm pretty sure that's not correct. That only applies if the property was his primary residence, which it sounds like it was not. Poodle will let us know.
If you've owned the property for longer than 2yrs, you shouldn't have to pay any taxes
quote:I'm pretty sure you're 0 for 2. Capital gains taxes for selling a property is different from the inheritance taxes due at the time of the death of the owner.
If it was declared as an inheritance, you shouldn't have to pay taxes if its valued under 5 mil
Posted on 8/19/13 at 8:17 am to LSURussian
Basis for the value of the property would be established when you inherited it. You will pay gains on difference between that and the current value. What's the difference in value?
Posted on 8/19/13 at 8:21 am to Latebloomer
I have no idea. She (my grandma) died in 1999. I'll have to look into what the value was but if I remember correctly it was not even close to what it is now. The value of timber is way up from 1999.
Posted on 8/19/13 at 8:26 am to Bob Sacamano
quote:
Q: I would like to sell an uninhabited house I inherited and to which I have made improvements. What would be my tax liabilities?
I assume you are talking about income tax liabilities, not any estate tax. The estate tax should already have been taken care of. In order to calculate the income taxes owed, you will need to calculate the gain or loss on sale. The first amount is the cost basis. You can obtain the cost basis from the estate tax return if one was filed. If not, your cost basis is the fair market value of the property on the date of death. You can also use what is known as the alternate date valuation, which would be the fair market value six months after the date of death. In order to have the smallest gain or largest loss possible, you want to use the date that has the higher value. From the sales price, you deduct the cost basis. In addition to deducting the cost basis, you also deduct the improvements you paid for as well as selling costs like real estate commissions. This is illustrated below:
Sales Price
Less cost basis
Less improvements
Less selling costs
Equals net gain or loss
You should report the gain or loss on Schedule D . The capital gain tax depends on what the rest of your return contains as well as how long you owned the property before selling. If you held the property for 365 days or less, you will be taxed on the gain at the same rate as the tax on your ordinary income. If you held the property 366 days or more, the tax on your gain will either be 5 percent, if you are in the lowest two tax brackets, or 15%, if you are in higher tax brackets. You will not owe a tax if you take a loss on the sale.
Rob Seltzer is principal of Robert Seltzer, CPA
Posted on 8/19/13 at 8:30 am to Lsut81
From the IRS
quote:
What happens if I sell property that I have inherited?
The sale of such property is usually considered the sale of a capital asset and may be subject to capital gains (or loss) treatment. However, IRC §1014 provides that the basis of property acquired from a decedent is its fair market value at the date of death, so there is usually little or no gain to account for if the sale occurs soon after the date of death. (Remember, the rules are different for determining the basis of property received as a lifetime gift). Refer to Gift Tax FAQ.
Posted on 8/19/13 at 8:30 am to Bob Sacamano
Mind if i ask why you are selling?
Do you want to get rid of it completely or do you just want to sell the timber?
I have been looking into buying land and planting pine trees. Some family members do it already and said they would help me out (for a cut of course).
As Mark Twain said "Buy land they are not making it anymore."
Do you want to get rid of it completely or do you just want to sell the timber?
I have been looking into buying land and planting pine trees. Some family members do it already and said they would help me out (for a cut of course).
As Mark Twain said "Buy land they are not making it anymore."
Posted on 8/19/13 at 8:31 am to Bob Sacamano
quote:
I inherited land many years ago
Lets just say that your basis is stepped up to where you don't have that much gain. Also, you will be taxed at a capital gains rate (which honestly isn't that advantageous thanks to Mr. Obama).
quote:
Can I avoid taxes by buying another property
You can sell the property and use a 1031 exchange to defer the taxes. Pretty useful tool. So yea, you can avoid the taxes.
Posted on 8/19/13 at 8:41 am to eng08
The land is in Alabama and pretty much just sits there while I pay taxes on it. I am selling it because I have no use for it and for me personally, instead of cashing out on other investments to buy a home, this is a good option.
Timber land is a good investment the only problem is it takes years to grow timber once you cut. I can probably get more return in the housing market than in timber land.
Disclousure: I'm no real estate/timber investing guru.
Timber land is a good investment the only problem is it takes years to grow timber once you cut. I can probably get more return in the housing market than in timber land.
Disclousure: I'm no real estate/timber investing guru.
Posted on 8/19/13 at 8:42 am to Bear Is Dead
I've done this before but don't know whether he could pull it off if he's planning on buying something for his personal residence.
Posted on 8/19/13 at 8:42 am to Bear Is Dead
quote:
You can sell the property and use a 1031 exchange to defer the taxes. Pretty useful tool. So yea, you can avoid the taxes.
This is what I am hoping for.
Posted on 8/19/13 at 8:43 am to Latebloomer
quote:
I've done this before but don't know whether he could pull it off if he's planning on buying something for his personal residence.
That's true, I didn't think about that. I've used it for a rent house before, but didn't think about the primary residence issue. Nvm
Not a CPA, I would check with one on this issue.
This post was edited on 8/19/13 at 8:44 am
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