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Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 721
Experience:  Certified Public Accountant
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My brother and I recently inherited some real estate in

Customer Question

My brother and I recently inherited some real estate in Washington State. As joint owners, will be selling a portion of the property. We will be carrying the contract with the new owner. What are your recommendations for paying taxes on the interest income? We do still have an estate account set up with it's own tax ID number.
Submitted: 2 months ago.
Category: Tax
Expert:  Mark Taylor replied 2 months ago.

Hi, my name is Mark. I will be happy to help you with your questions. Is the land being sold in the estate?

Customer: replied 2 months ago.
No. The estate has closed and the property is legally in our names.
Expert:  Mark Taylor replied 2 months ago.

It sounds like you are doing an installment sale. Part of the payment would be allocated to principal and part would be allocated to interest. Your sales agreement and the note on the loan would determine the interest amount. Since this was inherited property it is likely that you received a step up in basis to the fair market at the time of the person's death. There may be a small amount of capital gain associated with this purchase. If this is the case part of the principal payment would be allocated to recognize a portion of the gain. Since you recently inherited the property I would expect that the property gain would be relatively small.

Expert:  Mark Taylor replied 2 months ago.

I hope you found this information to be beneficial. If this answered your question please take a few moments to rate my response. A rating is needed in order for me to receive credit for helping you today. The rating bar is located at the top of the page – ranging from 1 to 5 stars. If you need me to clarify aspect of my response or if there are additional areas of the question that you would like me to consider please let me know. I would be happy to continue the discussion. It has been my pleasure helping you today.

Customer: replied 2 months ago.
We won't have any capital gains to pay. My question is about paying taxes on the interest earned. Can it be split between my brother and myself or does it have to be under just one of our social security numbers?
Expert:  Mark Taylor replied 2 months ago.

It would be split between the both of you. Assuming that you owned the property 50 - 50. Then the interest would be split evenly between the two of you.