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CGCPA
CGCPA, CPA
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Experience:  over 40 years experience in tax matters
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My dad died in May 2010, my mom is in an assisted living home.

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My dad died in May 2010, my mom is in an assisted living home. They own 80 farmland acres. My brother the executor wants to sell the land on contract asking 7,200 an acre, wanting $100,000 upfront and the rest over 10 yrs. at 4% interest to avoid yearly income tax. Acres now are auctioning at 8 to 13 thousand an acre. I think it would be smarter to auction the acres and invest the money to pay for moms assisted living over the years. What is your opinion?
Submitted: 3 years ago.
Category: Tax
Expert:  CGCPA replied 3 years ago.

Charles Greiner :

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Expert:  CGCPA replied 3 years ago.
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Expert:  CGCPA replied 3 years ago.

One of my concerns in this is the tax cost to your mom.80 acres at even the lower number of $7,200 is $576,000. The tax, if sold all at once would be quite high (I am using some assumed numbers to get a ballpark - $576,000 less basis $50,000 less exclusion for primary residence $250,000 = $276,000 x 28% tax rate = $77280). This is a high tax and reduces the amount available to pay for your mothers care.

 

I would seriously consider selling building lots, one or two at a time each year, to produce the money needed for her care and doing it at the auction prices. If you can do this the gain is spread over several years, more money is collected, lower tax bite proportionately, and you can save the house for last or sell it first to protect the exclusion depending on your mother's condition.

 

I see no logical point to selling it at a below auction price. Then the tax burden will come from that and even less will be left than if it sold at the higher auction price.

CGCPA, CPA
Category: Tax
Satisfied Customers: 3733
Experience: over 40 years experience in tax matters
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