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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10172
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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This is regarding capital gains tax on crop land--I sold

Customer Question

this is regarding capital gains tax on crop land--I sold some crop land I inherited in 2004 no appraisal was done at the time--how do I come up with the fair market value of the crop land in 2004 for calculating the capital gain--do I need some type of form or what for my tax preparer
Submitted: 9 months ago.
Category: Tax
Expert:  Lane replied 9 months ago.

Hi - I can help here.

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I hold a JD (Juris Doctorate, a doctoral degree in the law), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, as well as CFP® and CRPS designations. - I’ve been providing financial, Social Security & Medicare, estate, corporate & tax advice since 1986.

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No, IRS just asks for a reasonable estimate of the FMV as of the date of death if this is raw land. (one way to do that is to talk to real estate professional and see what like kind property was selling for at the time.)

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The very BEST way to document is to use an appraiser that will do what's called a retrospective (or date of death) appraisal.

Here's an example of a firm that does this (I have no association): http://www.appraiservalues.com/dateofdeathvaluations/

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Was the land being farmed then and now?

Customer: replied 9 months ago.
Expert:  Lane replied 9 months ago.

IRS may require an appraisal ... You can always use your best estimate and document hos you determined the value, but for active farmland, the number o returns where IRS has asked for an appraisal upon audit has been on the rise

Expert:  Lane replied 9 months ago.

(what we DON'T know is whether this may be because of under-reporting) ... A colleague in our office that works with farmere says that in her experience, the appraisals are coming for values in excess of 1MM AND when the values being reported are suspect

Expert:  Lane replied 9 months ago.

The place where appraisal are REQUIRED with the return are when form 706 (estate tax) is done ... which is not required until the estate is at $5,450,000 today

Customer: replied 9 months ago.
well my sisters cropland is similar to mine and at the time of our fathers death in 2004 she had hers appraised as she was in the process of selling it to another family member--could a copy of this be helpful
Expert:  Lane replied 9 months ago.

Yes, absolutely. VERY good

Expert:  Lane replied 9 months ago.

Likely the best evidence you'll find

Expert:  Lane replied 9 months ago.

What was the sales price of yours? (no personally identifying information lease)

Customer: replied 9 months ago.
ok $550,000 for 160 acres
Expert:  Lane replied 9 months ago.

You're nowhere near the place (the dollar level) where there wold be required appraisals to be filed with the return.

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Given that you have the copy of the other appraisal on like-kind land, I would provide a copy to the tax preparer and keep for your records

Customer: replied 9 months ago.
ok thankyou--you have answered all my questions!
Expert:  Lane replied 9 months ago.

You're very welcome ... Your positive rating … (by using those the stars or rating request on your screen) … is thanks enough! … That’s how we’re credited for the work here

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Thank you,

Lane

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