- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
Land Sale Tax Question
Posted on 11/3/16 at 8:28 pm
Posted on 11/3/16 at 8:28 pm
I inherited 7.5 acres of land from a relative several years ago. I am in the process of selling the land. Is the money that I receive from the sale of the land considered income for income tax purposes? This is a rather large sum of money but it is one time money. It's not my normal income from work. Will I get hit with a large tax bill when I file taxes or is there a way to spread the money from the sale over several years? Am I supposed to self report this when I file taxes or will the buyer's bank or attorney report the sale?
Posted on 11/3/16 at 10:08 pm to damonster
Never sell land
it will be part of your 2016 tax return - most likely get hit with taxes due - schedule D will likely be your enemy. Is the land adjacent to or close to your primary residence?
yep
quote:
Will I get hit with a large tax bill when I file taxes or is there a way to spread the money from the sale over several years?
it will be part of your 2016 tax return - most likely get hit with taxes due - schedule D will likely be your enemy. Is the land adjacent to or close to your primary residence?
quote:
Am I supposed to self report this when I file taxes
yep
Posted on 11/3/16 at 10:29 pm to damonster
when you inherited it, you get a stepped up basis, so the value when they died is basically your acquisition price. From then till now how much has it appreciated? That is what you owe tax on if you sell and then its 15% of that bc of long term capital gains
So what was value when they died
What is the value today
what is the difference
what is 15% of that difference
Stepped up basis allows some serious wealth transfers
So what was value when they died
What is the value today
what is the difference
what is 15% of that difference
Stepped up basis allows some serious wealth transfers
This post was edited on 11/3/16 at 10:32 pm
Posted on 11/3/16 at 11:09 pm to damonster
Like dabigfella said... you will owe cap gains tax on the appreciation between the day the dead person died, and the day you sell it. Capital gains rates are generally 15% but are 20% at high AGI levels. You can deduct any costs of sale such as commissions and closing costs paid in determining the gain.
Depending on the amount of the gain and your other income, you may also owe 3.8 percent net investment income tax on the gain amount.
If you accept an installment note on the sale, and get the money over time, you can spread the tax hit out int he same ratio that you receive the cash.
Another possibility is a 1031 exchange in which you acquire a replacement real property with the proceeds from this sale. That defers the gain (and thus the tax) on the sale. There are some rather complex and inflexible rules on how these work, so if you don't want to cash out and you want to stay invested in real property, talk to a company that does this type of work. You need to hire a qualified intermediary.
Depending on the amount of the gain and your other income, you may also owe 3.8 percent net investment income tax on the gain amount.
quote:
Will I get hit with a large tax bill when I file taxes or is there a way to spread the money from the sale over several years?
If you accept an installment note on the sale, and get the money over time, you can spread the tax hit out int he same ratio that you receive the cash.
Another possibility is a 1031 exchange in which you acquire a replacement real property with the proceeds from this sale. That defers the gain (and thus the tax) on the sale. There are some rather complex and inflexible rules on how these work, so if you don't want to cash out and you want to stay invested in real property, talk to a company that does this type of work. You need to hire a qualified intermediary.
This post was edited on 11/3/16 at 11:10 pm
Posted on 11/4/16 at 11:54 am to dabigfella
quote:
Stepped up basis allows some serious wealth transfers
That's true, but unfortunately someone has to die.
Posted on 11/4/16 at 4:28 pm to dabigfella
Ok. Let me make sure that I'm clear on this. I'm just going to throw out some numbers. If at the time I went with all the other heirs to the attorney's office (many parcels of property were in the estate), the appraised value of this particular parcel of property had appraised for $100,000. If I sold it for $150,000 today, then the difference is $50,000. Would I pay $7500.00 in tax at on this upcoming tax return?
Posted on 11/4/16 at 4:56 pm to damonster
I'm not sure if it's appraised value at the time or market value at the time the reason I say that is there is many times a huge difference with land. For instance I have a 82,000 sq ft commercial parcel of undeveloped land here in houston where tax value is like 30% of its real value. The county assessors are usually way off on land valuations.
On the otherhand as someone else mentioned a 1031 exchange you would pay 0 in taxes but you would have 45 days after the sale to identify another property over the value of the current one you're selling and then you have a couple months to buy it.
If you want to cash out in cash, then you will pay taxes and your math is about right give or take.
On the otherhand as someone else mentioned a 1031 exchange you would pay 0 in taxes but you would have 45 days after the sale to identify another property over the value of the current one you're selling and then you have a couple months to buy it.
If you want to cash out in cash, then you will pay taxes and your math is about right give or take.
This post was edited on 11/4/16 at 5:03 pm
Posted on 11/5/16 at 8:52 am to dabigfella
Fair Market Value at death generally sets the basis. That gives you some wiggle room, but the IRS knows it, and there is a new 2015 law that can pop you with an accuracy-related penalty if you fudge too much.
You're going to need to complete Schedule D.
If there's much money at issue, it may be worth it to consult a tax professional.
Here is what the IRS says about sales of inherited property: LINK
You're going to need to complete Schedule D.
If there's much money at issue, it may be worth it to consult a tax professional.
Here is what the IRS says about sales of inherited property: LINK
Popular
Back to top
Follow TigerDroppings for LSU Football News