I inherited 400 acres. My mom and dad paid 600 an acre for it. Now it is worth $3,000 an acre. I do not want to sell it. I want to keep farming it. Do I have to pay the capital gains on the land if I do not sell it , but keep it?
2007-11-23 11:19:16 · 6 answers · asked by ffcounselor 1 in Business & Finance ➔ Taxes ➔ United States
I am sorry to hear of your parents' deaths.
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inherited property is "marked up" to the value it had at the death of its owner(s) for income tax purposes. What they paid for it years ago is no longer the "basis" (cost) for tax purposes.
thus, you will owe any long term capital gain tax only after you sell or trade the property and then, ONLY on the difference between the value when your parent died and what you sell it for.
the property tax assessor in your area likely has different rules.
2007-11-23 11:30:34 · answer #1 · answered by Spock (rhp) 7 · 1⤊ 0⤋
Capital gains on inherited property is always long term and you will pay tax on the difference between the value when you inherited it and when you sold it. Until you sell it, you do not have income. Your parents' estate would pay estate tax on that value if there was enough of an estate to warrant filing a return.
2007-11-23 11:48:42 · answer #2 · answered by Anonymous · 0⤊ 0⤋
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Inheritance tax zeros out the capital gain so you would pay capital gains tax on the difference between the value at the time you inherited (even if the value was below the threshold) and the value on resale.
2016-04-05 00:59:58 · answer #3 · answered by Jeanne 4 · 0⤊ 0⤋
Capital gains are not realized until you sell the inherited property. When you do sell the property your basis will be the fair market value on the date of the decedent's death.
Therefore your basis would not be the value of the property when your parents bought the property instead your taxable capital gain would be the difference in value from when you inherited the property to when and if you sell the property.
2007-11-23 11:38:33 · answer #4 · answered by Tom Z 7 · 0⤊ 0⤋
You will have long term capital gain only when you sell the property.
Also your basis of the property is not $600 an acre that is what your mom and dad paid; it may be more than that.
"If you inherit a property, your cost basis is the valuation (Fair Market Value) of the property at the date of the decedent's death or the FMV (Fair Market Value) on the alternate valuation date if the personal representative for the estate elects to use alternate valuation."
2007-11-23 18:08:35 · answer #5 · answered by MukatA 6 · 0⤊ 1⤋
No, you'd only pay capital gains tax if you sell it. You will pay property taxes on it every year, though.
2007-11-23 11:55:06 · answer #6 · answered by Judy 7 · 0⤊ 0⤋
Capitol gains taxes are paid on real property when it is sold.
2007-11-23 11:24:22 · answer #7 · answered by Anonymous · 0⤊ 0⤋