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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4225
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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I am retired. I live in Idaho. I have a piece of unimproved

Resolved Question:

I am retired. I live in Idaho. I have a piece of unimproved land in New York that I inherited from my father in 1990. I do not know the value of that land at the time of his death. I want to sell that piece of property. My realtor states that $109,000.00 is a reasonable price based on comparable sales at this time. My question for you is: What information is accepted by the IRS as proof of the value of the land in 1990. Will I have to pay capitol gains taxes to New York for selling my inheritance? Will I have to pay the same tax to the state of Idaho, where I am a resident? Is there any tax break for reinvesting that money in a home to grow old in?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Lane :

Hi,

Lane :

Lets take them one at a time...

Lane :

There are several ways to establish your basis in the property (who knows give real estate prices today you may not have a gain) ...

Lane :

(1) Tax office in the jurisdiction where the land is ... (look for comparable sales at the time)

Lane :

(2) The Realtor should be able to go into their historical databases and look for land sales in that area at that time

Lane :

(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

Lane :

Let me pull up what IRS will need ...

Lane :

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

Lane :

Here's what I just saw, but nothing about acceptable documentation UNLESS you can find an actual appraisal of the land at that time:

Lane :

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.




  1. The FMV of the property at the date of the individual's death.




  2. 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.




  3. 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.




  4. 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.

Lane :

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

Lane :

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

Lane :

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

Lane :

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)

Lane :

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

Customer:

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?

Lane :

No, it would have been required nine months after the date of death AND the estate tax exemtion now stands at $5250,000

Customer:

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?

Lane :

THe rate depends on your income tax bracket

Lane :

just a sec...

Lane :

Now, as of the last tax act, the rate (if you are in either the 10 or 15% tax bracket it is ZERO)

Lane :

Once you hit the 25% bracket the rate becomes 15%

Lane :

If you want to ballpark your income for me I can tell you what bracket you're in

Customer:

I'm in the 25% bracket.

Lane :

then it will be 15%

Customer:

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.

Lane :

You too!

Lane :

If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.


HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.

Lane :

See this on the Idaho gains: http://tax.idaho.gov/i-1100.cfm

Lane :

Can I help you with anything else today?

Lane :

I just found this for you:

Lane :

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.

Lane :

  • Form-40 - Idaho Individual Resident Income Tax Return

  • Form-39R - Idaho Supplemental Schedule

Expert:  Lane replied 1 year ago.
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Expert:  Lane replied 1 year ago.

Hi Barbara,

... just checking back in here, as I never saw you come back into the chat.

Note that I attached (link ed above) the Idaho supplemental form, Form-39R, to file with your Idaho taxes to get the credit for any tax paid on the capital gain in NY.

I hope this has helped

Let me know ...

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4225
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 8 other Tax Specialists are ready to help you

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