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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 6246
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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i inherited a painting from my father (a non-US citizen) long

Resolved Question:

i inherited a painting from my father (a non-US citizen) long time ago. i sold this painting recently for 78000. I don't know the original cost. Should i pay any tax?
Submitted: 4 years ago.
Category: Tax
Expert:  Stephen G. replied 4 years ago.

Stephen E. Grizey :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.

Stephen E. Grizey :

Do you know what tax bracket you are in, not counting any gain you may have on the sale of the painting.

Customer:

20%


 

Stephen E. Grizey :

Are you typing something to me?

Stephen E. Grizey :

Did you inherit the painting as a result of your father's death?

Customer:

yes

Stephen E. Grizey :

You will have to estimate the painting's fair market value at the date of your father's death and that will become your tax basis (cost) for purposes of determining your capital gain on the sale.

Customer:

do you have an answer?


 

Stephen E. Grizey :

Note that you are dealing with a collectible, so the tax rate on the gain will be the same as the highest tax rate you pay on your other income, not the capital gains rate;

Stephen E. Grizey :

that means you will pay at the percentage rate of 10, 15, 25, or 28, depending upon what tax bracket you fall into. Since you said your rate was 20%, you must have combined something as there is no 20% tax bracket. You are likely in the 25% tax brackett.

Stephen E. Grizey :

The highest tax bracket you are in means the rate that your last $1. of income is taxed at.

Stephen E. Grizey :

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Customer:

you mean i have to pay 78000*25%

Stephen E. Grizey :

No. Only the on the difference between the fair market value when your Dad died and the $78,000. sales proceeds.

Customer:
Stephen G. and 3 other Tax Specialists are ready to help you
Customer: replied 4 years ago.
I still don't know how to establish the fair market value for the painting. You did not answer.

 

ktu

 

Expert:  Stephen G. replied 4 years ago.

The best way to establish a fair market value at any point in time is to have an appraisal. Appraisals can be done as of a certain date, many years after the fact; art dealers for example have many methods of doing this based upon comparable sales of comparable artist's works both at the time you sold your painting and at the time your
father died. Perhaps you know where the painting is now or you have a picture of it that you could use to identify the painting for the appraiser.

Clearly having at least a written opinion of value, if not a full appraisal, by a qualified appraiser should result in a lot lower gain subject to tax rather than using the full sales price, absent any estimate of the value of the painting when your father died.