I have a question in regard to my two cemetery plots in Illlinois that I received in my divorce. Now I live in Arizona. I don’t know which would be the best for me in regard to taxes at the end of the year.I am retired and I get a Teacher’s pension and Social security. Last year my taxes on my 1040 income tax return totaled $ 41,706. I will probably earn about the same amt. this year.The following is the information I received regarding my plots. I can donate them to the Memorial Park and get a letter of donation of $5030 which can be used at tax time. Would this be a benefit to me?Or the Memorial Park can buy them back for $300 each x2 = $600 Or transferring the plots to closer to where I live, I would get the credit of $535 (amt I originally pad for the 2 lots) towards the purchase of 2 lots in Arizona. I would have to pay the balance based on the current pricing of cemetery plots. (I don't know what plots cost in AZ - Probably a couple of thousand each (but I only need one)Or I can try to find a buyer and owe the Memorial Park 854.50.Or I can get a credit of $535.00 (which is what was the original price for the plots).Can you help me? Thank youDiane Berlin
There are many options that you presented so please be sure to reply and continue the conversation, as needed.
Or the Memorial Park can buy them back for $300 each x2 = $600
Or ... I would get the credit of $535 (amt I originally pad for the 2 lots) ...
Or I can get a credit of $535.00 ...
Those choices would seem to easily say that $600 in pocket is better than $535 of credit.
Selling the plots for $600 having paid $535 would be a gain reported on your tax return but the maximum tax is at 15% so the $600 is still better.
The other option is a letter for a donation of $5030.
There will be the most tax benefit only if you already itemize (mortgage interest, property tax, etc) and use Schedule A. If you use the standard deduction there is not enough tax benefit to make this option better than $600 in pocket since you can only use either the standard deduction or itemized deductions.
An itemized deduction reduces your taxes by your marginal tax rate. Using a 15% rate a deduction of 5030 could reduce your income tax by about $755.
The $755 of deduction might be better than the $600 in pocket but there are substantiation requirements for a charitable donation of property valued at more than $5000. If you make a donation exceeding $5,000 (one item or a collection), you must obtain a written appraisal for your donation. The letter from the cemetery is not enough to allow the deduction.
The possible maximum reduction in tax when you file (and get an increased tax refund next year) of $755 minus the cost and trouble of the required appraisal has to be compared to the $600 in pocket from selling the lots.
The other choice was:
Or I can try to find a buyer and owe the Memorial Park 854.50.
That choice can not really be compared to the other choices unless we know (or guess) what price you can get for the plots. If the $5030 is the actual value of the plots then this may be the most money that can be obtained; but there is the work and expense of selling that has to be considered.
Guessing that you can sell for $4000 after advertising and other expenses would give you more than $3100 in pocket after the sale. Paying 15% tax on the profit would reduce that by about $250. Possible net gain from selling to a third party for my price guess is about $2850.
Of course, a sale at that price (or how long it may take to sell) is not guaranteed.
Personally, my choice would be the $600 in pocket without much effort. The slightly higher refund amount later does not seem worth the trouble (even if you do itemize deductions) of getting an appraisal. The uncertainty of price and timing of a sale to another party also leads me to the easy $600.
Of course, the choice is yours if you would like to pay the $855 and try to find a buyer for a higher possible net return rather than taking the $600.
Hopefully this discussion is useful as you decide which option you would prefer.
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Thank you so much for your help. I was leaning toward the $600.00 cash in hand. I really didn't want to ask my relatives for their advice as I didn't want to get into a "personal" involvement with how much I earn, etc. My brother in law was extremely anxious to help, but I think the underlying motive was not to help me nut to see if he could benefit. Thanks for for the help and advice. It's much better to ask an impartial party than to involve relatives. D. Berlin
You are quite welcome.
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