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Jax Tax
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1408
Experience:  JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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I inherited land and family farm debt about 8 years ago and

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I inherited land and family farm debt about 8 years ago and am considering selling part of the land to pay off all that debt. Is the debt I assumed from the estate able to be subtracted from the capital gains from the land sale?

Jax Tax : The assumption of debt is added to the stepped up basis and then used prorata based on the portion sold.

In layman's terms, please?

Jax Tax : So your current basis is the FMV of the property on the date of death plus the debt that was assumed. Use this basis. You then determine for example that the portion sold is say 10% of the total value, you use 10% of the basis against the sale price to determine gain. Have you used the property as your main residence?

no, it is agriculture land. I've been paying the interest on the note each year, but hardly paying any of the principal at all. My land value has jumped so high that it seems to me it makes sense to sell one of the two fields in order to pay off all the debt, but I'm having a tough time finding information to see if I'm on solid ground with this.

Jax Tax : Have you been renting the land or just holdin it?

renting it. First on a share basis, but the past 5 years on a cash basis

Jax Tax : So you have been claiming the rent on Sch E?

Can't say off top of my head if it is on Schedule E, but I have been claiming the rent.

Jax Tax : Good. Are there any buildings on the land that have been depreciated?

to work with this whole thing would I get a tax person in Nebraska, where the land is or can a MA tax person find the info too?


I just got my new tax valuation and the 2011 tax on this tract has gone from 189675.00 to the current level of 235980.00. the ag land is taxed at 77% of value. So would that mean the land is supposedly worth 23% more than the current level?

Jax Tax : Ok. Anyone can do the return for you. Just make sure you have a copy of last year. You will determine basis as I stated above reduce by any depreciation claimed if any. Then divide the basis on a value percentage of the portion sold. That will do it. The issue you need to over come if thaw sale price will not full pay the bank is getting the bank to release that portion of the property from the mortgage lien. It shouldn't be that hard. If this helps please accept so that I receive credit and feel free to leave a comment. Do you have any other questions?

Actually, when I first inherited the land it would have taken both tracts to cover the debt. Now the land has increased so much in value that the one tract will more than pay off all the debt. that's why I was hoping that I could use all the tax savings at once, but you have cleared that up for me.


Thanks for the help.

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