Capital Gains and Losses

Capital Gains and Losses

# My spouse purchased a farm for \$ 64000, then upon our

Customer Question
My spouse purchased a farm...
My spouse purchased a farm for \$ 64000, then upon our marriage added my name to the title as joint tenancy. He then died and I am selling that farm for \$200000 (in the state of Missouri). How do I calculate my capital gains tax?
Submitted: 2 years ago.Category: Capital Gains and Losses
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9/2/2015
Tax Expert: CGassist.168, Accountant replied 2 years ago
CGassist.168, Accountant
Category: Capital Gains and Losses
Satisfied Customers: 3,859
Experience: Tax Accountant
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Q: How do I calculate my capital gains tax?

A: SEE BELOW

Avoiding capital gains in Joint Tenancy

When real estate or other property is purchased, its purchase price is considered to be its "basis". When that real estate or property is finally sold, its sale price is its true market value, and the gain between its purchase price (basis) and its sale price is the portion of its value that you pay Capital Gains Tax on. In a situation where a married couple owns a home in Joint Tenancy and one spouse dies, the surviving spouse is deemed to own one-half of the value of the property. The deceased spouse owns the other half of the value of the property, and if there is a Capital Gain subject to Capital Gains taxes, the estate of the deceased must pay Capital Gains tax on its half of the gain. A home purchased many years before which has appreciated by \$200,000 or \$300,000 can incur a sizable Capital Gains tax if it is not in a Living Trust.

Example: If a home were purchased by a couple in 1960 for \$50,000 and today its fair market value is \$300,000, there would be a taxable gain of \$250,000 if it were sold today. Since the deceased spouse's estate takes one-half of the property value, \$25,000 (one-half the original purchase price) and \$125,000 (one-half of the gain at death) is attributed to the deceased's estate. Capital Gains Tax becomes due and payable in the amount of 18-20 percent of the \$125,000 Capital Gain, or \$25,000 in taxes at the sale of the home. Taxes could be more if the home is not sold for some time and the gain increases. Conversely, taxes would be less if the gain in the value of the house decreased before its sale.

REFERENCE SOURCE:

http://heritagelivingtrust.com/blog/2013/3/30/joint-tenancy-and-capital-gains.html

Let me know if you require further assistance with this matter.

CGassist.168, Accountant
Category: Capital Gains and Losses
Satisfied Customers: 3,859
3,859 Satisfied Customers
Experience: Tax Accountant

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