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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 10476
Experience:  Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
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I inherited a 113 acre farm near Johnstown PA upon my fathers

Resolved Question:

I inherited a 113 acre farm near Johnstown PA upon my fathers death in 2010. I paid an inheritance tax based on his estate assets to PA but since there was no Federal Estate Tax in effect for 2010 I didn't pay any federal taxes. I am now planning to sell the farm to the man who farms it but since I did not get a FMV appraisal subsequent to his death, I was trying to determine if I need to get an appraisal and whether it would have any legitimacy since it is now more than 3 years since his death. It is doubtful if the property value increased by much if at all in this time period. I had requested an appraisal but the person who was going to do it got sick and I never followed up on it since my wife was suffering through terminal cancer.

The asset summary for paying the PA inheritance tax had an appraised value of 123,000
for the farm including a house, barn and detached garage. I am selling the farm for 220,000
and believe it is a better valuation than the appraised amount on the inheritance form. Obviously I want to avoid capital gains taxes if I can given the circumstances. and if I have to pay any I would prefer to do so in 2014 since I have done fairly well in the stock market this year.

Second question: When is sale a sale as far as tax purposes? By this I mean if I entered
into sales agreement for the sale of the farm this calendar year, but settlement would be in 2014 at which time all but 5000 of the agreed to 220000 amount would be transferred to me, would the sale date for tax purposes be this year or when the money is actually transferred to me at settlement? The 5000 down payment would be held in escrow until settlement.

IThank You. Thomas Knapp
Submitted: 5 months ago.
Category: Tax
Expert:  Megan C replied 5 months ago.

Megan C :

Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.

Megan C :

How are you today?

Megan C :

The best thing you could do now is get the appraisal, and then get some sort of documentation on how much the market has fluctuated over the past three years

Megan C :

So, if the market has remained flat, then the appraisal value would be what it appraised for now.

Megan C :

If the market increased 2%, then I would subtract 2% from the appraisal and use that as the basis.

Megan C :

The sale occurs for tax purposes when the benefits and burdens of ownership pass from the seller to the buyer, even if this happens before formal closing.

Megan C :

So, if the buyer takes possession of the farm prior to the final settlement, when they took possession is when the sale is deemed to have occured, even if no funds have been transferred to the seller.

Customer:

Thanks for your answers. Re the appraisal, are you saying it would be whatever value it is today plus or minus a rate it might have fluctuated? I am not sure who I would get this adjustment rate from since the farm is unique and comps are highly unlikely.

Megan C :

Yes, I would get the information from a realtor on property overall. Just how market values in general have fluctuated. This is not the ideal situation, but without an appraisal done three years ago it's the best you can do.

Megan C :

The land has value which would fluctuate about the same as other land in that area.

Customer:

OK, thank you. The other answer regarding the sale date is quite clear and is certainly going to help me

Megan C :

I'm glad I could help

Megan C :

Is there anything else that I can assist you with today?

Customer:

No, I think that will be it unless you know if a survey is required to effect the sale of the farm.

Megan C :

For tax purposes, it would not. I can only speak to tax scenarios, unfortunately

Customer:

Ok , Thx. Have a nice day.

Megan C :

You too, if you would please take a moment to rate my response as "excellent"

Megan C :

so that I may receive credit for assisting you today

Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 10476
Experience: Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
Megan C and 11 other Tax Specialists are ready to help you
Expert:  Megan C replied 5 months ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

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Expert:  Megan C replied 5 months ago.
Thanks for the opportunity to assist. It was a pleasure working with you today. I see you dropped out of chat. If you would, please take a moment to rate my response as "excellent" as that is how I get credit for assisting you today. If you need anything else, just come back to this page, hit the "reply" button and let me know what you need.

Thanks so much!

Megan
Expert:  Megan C replied 5 months ago.
Thanks for your positive rating. Please come back and visit me any time you have a question that needs answered. It was a pleasure working with you today!

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