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RD
RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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What are the tax consequences of selling a farm that I ...

Customer Question

What are the tax consequences of selling a farm that I inherited? I have been offered $80,000.
Submitted: 8 years ago.
Category: Tax
Expert:  RD replied 8 years ago.

What is the fair market value of the farm as of the date of death of the decedent?

You will owe capital gain tax(long term) on the gain on sale which is calculated as sale price minus selling expenses minus the fair market value of the farm as of the date of death of the decedent.

The gain, being long term, will be taxed upto a maximum rate of 15%.

You will owe State tax on the gain too.

 

Let me know if you have any question.

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

 

 

Customer: replied 8 years ago.
The fair market value was $80,000. It has not changed. My father was offered $80,000 by our renter and the renter has repeated the offer to me.
Customer: replied 8 years ago.
Reply to RD's Post: The farm was given to me about 3 years ago and the farm has not gained in value since that time. It was 80,000., 1000. per acre then and is still worth that now.

If I invest the money into my home will I avoid capital gains. If I pay my school loan which is 50,000. and put the rest into my home (2nd Mortgage), does that help me avoid my capital gains?
Expert:  RD replied 8 years ago.

Did you inherit the property from your father 3 years ago. If yes than the cost basis for your will be the fair market value which is $80.000

If you sell for the same price than you do not have any gain and hence no tax is due. In fact after you factor in the selling expenses you may have a small loss.

You can use the funds from sale in any way you wish. Since there is no capital gain there is no tax due.

Note that if there was a gain than reinvesting the sale proceeds in your home or school loan would not give you any break from capital gain.

 

Let me know if you have any question.

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.