How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Tax.appeal.168 Your Own Question
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 3443
Experience:  3+ decades of varied tax industry exp. Tax Biz owner
Type Your Tax Question Here...
Tax.appeal.168 is online now
A new question is answered every 9 seconds

There is a second home I own in Michigan which is being sold.

Resolved Question:

There is a second home I own in Michigan which is being sold. It was built by my uncle over several years. He included my name on the deed along with my aunt and himself. They are now deceased and the property is in my name only. I live in Massachusetts.
The property is being sold for $91,000 with a net of $83846.00 after settling costs. How do I estimate what the capital gains tax will be for me? Are there things which I can deduct from the sale price like estimating his building costs/repairs?

I would greatly appreciate your help. Many thanks.
Submitted: 5 years ago.
Category: Tax
Expert:  Tax.appeal.168 replied 5 years ago.
Hello, THANK YOU for choosing Just Answer. My goal is to help make your life...a little...LESS taxing.

The original basis of the property is adjusted by deductions, such as depreciation, or by additions, such as capital improvements. Adjusted basis is the new basis after additions or deductions to the original basis have been made. The basis for determining gain on inherited property is the property's fair market value on the date of the decedent's death. Fair market value is the price that property would sell for on the open market. The gain or loss from the disposition of the property is determined by comparing the sale price to the adjusted basis in the property. The tax rate on the gain is 15%.

Customer: replied 5 years ago.
Can you give me more specifics (examples) of 'adjusted basis' - what does this mean?
Expert:  Tax.appeal.168 replied 5 years ago.
Hello again,

In this case basis is just another word for cost. So when we refer to adjusted basis, we are really saying adjusted cost. So once you deduct selling fees, depreciation, and capital improvements (building repairs), you will have the adjusted basis/adjusted cost. This is the amount that will be subtracted from the selling price to determine the true capital gain on the property. However, determining the adjusted basis does not apply to you because you inherited the property. You can ignore the adjusted basis lingo all together.

Let's say the FMV (Fair market value) of the property was $650,000 at the time of your uncle's death. The $650,000 would be the starting number to determine the true capital gain. The property sales for $750,000. Your gain would be $100,000. The $100,000 will be taxed at the 15% capital gains rate.


Basis of Inherited Property

The basis of inherited property is usually its fair market value at the time of the donor's death. There are three exceptions to this rule.

1. If a federal estate tax return is required and if the property must be included in the decedent's gross estate, the basis may be the special-use valuation if special-use valuation is elected.

2. If a federal estate tax return is required and if the property must be included in the decedent's gross estate, the basis may be the fair market value on the alternate valuation date if alternate valuation is
elected. Special-use and alternate valuation are permitted only under special circumstances.

3. When an heir, or an heir's spouse, gifted the property inherited to a person who dies within one year of the gift the basis of the inherited property is the deceased person's basis immediately before death rather than its fair market value. This is the same as the original owner's basis prior to the original gift. This rule
came into effect in 1981 to prevent individuals from gaining the benefit of basis stepped up to fair market value by a temporary transfer of property to elderly persons.

Tax.appeal.168 and 3 other Tax Specialists are ready to help you

Related Tax Questions