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Christopher Phelps
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience:  CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
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capital gains taxes and gift taxes

Customer Question

my father want to give me 10 acres of land it has a tax value of 150,000 and he paid 8,000 for it and a company want to give 300,000 for it How much tax would i have to pay on the sell and what tax would he pay our income are less than 40 a year i also understand 1031 but would some cash to remodel investment properties
Submitted: 11 years ago.
Category: Tax
Expert:  Christopher Phelps replied 11 years ago.

Were your Father to gift the property to you he would be required to file a gift tax return (Form 709).  He would likely not have to write a check to the IRS however, he would effectively use $289,000 of his $1,000,000 lifetime gift exemption. 


You would assume your Father's cost basis of $8,000 as well as his holding period.  Assuming he has held it for more then one year, then the $292,000 gain realized (i.e. $300,000-$8,000) will be considered long-term subject to a maximum Federal rate of 15%. 


If the property is considered an investment property you may be ale to do a Sec. 1031 exchange into another property.  To accomplish this you need to use an intermediary (i.e. an accomodator) to hold the proceeds from the sale on your behalf and to purchase the new property.  You must never directly receive the proceeds from the sale in order to not have to recognize capital gain.  Certain time limits are imposed so its important for you to use a qualified intemediary who can guide you on these issues.  A good escrow company or real estate attorney can point you in the right direction.  Your Father can also do this 1031 exchange and not have to immediately recognize gain for tax purposes.

     
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience: CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
Christopher Phelps and other Tax Specialists are ready to help you
Customer: replied 11 years ago.
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