re: Land Sale Tax Question

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.

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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?

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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.