It is correct that when you sell property
you owe capital gains
taxes on any increased value in the property over time. When you inherit property, your basis for tax purposes is the fair market value of the property at the time of the donor's death. Therefore, if $1750/acre was the FMV at the time of death and you sell for $3000/acre, your mother would owe taxes on $1250/acre as a capital gain. The maximum long term capital
for real property is 15%, so the tax paid would be $187.50/acre.
Keep in mind, however, that there are things that could alter the taxable amount
, such as any depreciation
you took on the land while you owned it, or any costs you incurred to improve the property, or costs related to the sale (such as legal fees or broker commissions).
The other important issue to consider is whether the land was properly valued at the time your mother inherited it. It could very well be that the property should have been valued higher at the time. The burden
, however is on your mother to show the valuation made in 2000 was incorrect. But if you think the land was worth more at the time, it may be worth paying a professional appraiser to appraise what the land was really worth at the time she inherited it. If we are talking about a lot of land, a reappraisal could be well worth it.
I hope this helps!
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