Have a Tax Question? Ask a Tax Expert
Lets take them one at a time...
There are several ways to establish your basis in the property (who knows give real estate prices today you may not have a gain) ...
(1) Tax office in the jurisdiction where the land is ... (look for comparable sales at the time)
(2) The Realtor should be able to go into their historical databases and look for land sales in that area at that time
(3) the ideal way (which may not be free, but will be the best documentation) is to use a qualified appraiser. A professional appraiser will have access to the historicals (valuations) for land in that same area
Let me pull up what IRS will need ...
Still looking, sorry, I am seeing a lot of information about getting appraisals for estate tax purposes, but for establishing a value for 14 years ago, they IRS is not providing much advice
Here's what I just saw, but nothing about acceptable documentation UNLESS you can find an actual appraisal of the land at that time:
If you inherited property from a decedent who died before 2010, your basis in property you inherit from a decedent is generally one of the following.
The FMV of the property at the date of the individual's death.
The FMV on the alternate valuation date if the personal representative for the estate chooses to use alternate valuation. For information on the alternate valuation date, see the Instructions for Form 706.
The value under the special-use valuation method for real property used in farming or a closely held business if chosen for estate tax purposes. This method is discussed later.
The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement. For information on a qualified conservation easement, see the Instructions for Form 706.
If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes.
While I'm looking, very quickly, If both states have a capital gains tax, then your home state will provide a credit for taxes paid to another state you'll not have to pay it twice, BUT the net effect may be that you will end up paying the higher of the two
OK, any reasonable method for determining the basis at the time of death can be used. You do not have to have a paid appraisal
Your best documentation would be sales prices of comparable land around that time ... I would als the real estate agent for help on that as he/she is in the area
I think that's everything, but the last question: No there is not really any tax break for investing that money in another home (other than the fact that this will be your new basis in that home, and if sold later, as you primary residence, up to $250,000 is excluded from gain ($500,000 for couled married filing jointly)
And finally, regarding the gain on sale of the inherited land: (1) you may not have a gain, or it could turn out to be relatively small, given real estate values over the last 10 years ... (2) it will be taxed at capital gains rats, which are lower than ordinary income taxes
As far as I know my father's estate did not require a federal estate tax to be filed. Would selling this property now cause that to happen now?
No, it would have been required nine months after the date of death AND the estate tax exemtion now stands at $5250,000
Ok, thanks for the info. I was told that the cpital gains tax is 15%. Is that like a flat rate or does it vary with my gross income?
THe rate depends on your income tax bracket
just a sec...
Now, as of the last tax act, the rate (if you are in either the 10 or 15% tax bracket it is ZERO)
Once you hit the 25% bracket the rate becomes 15%
If you want to ballpark your income for me I can tell you what bracket you're in
I'm in the 25% bracket.
then it will be 15%
Thankyou for your help in this matter. There is so much I don't know and Idaho tax laws are different. Have a great day.
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See this on the Idaho gains: http://tax.idaho.gov/i-1100.cfm
Can I help you with anything else today?
I just found this for you:
If you are an Idaho resident who works in another state you will be taxed on all income earned in the other state because Idaho taxes its residents on all income they earn. However such income may also be taxed by the state in which it was earned. To avoid dual taxation on such income Idaho provides its residents that paid taxes to another state a tax credit. This credit maybe claimed by filing both an Idaho resident return (using Form-40) and Idaho Supplemental Schedule (Form-39R, attached below). Make sure to also include the return filed with the other state.