Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax

I purchased at a minimum cost land from my sister, that has

Customer Question
been in our family for...
I purchased at a minimum cost land from my sister, that has been in our family for generations in 1992. It is 54 acres. I am now selling it to my sister since I realize that I am not going to ever be moving to that state from where I live now. I am also going through a divorce, but the land is considered premarital because I didn't marry until 1993. My question: I need to avoid any tax liability from capital gains. Is that possible? Do I have to put that money into another property, which is what I want to do. What are the capital gains laws, as they would apply to me? I would be also receiving about $80,000 from the marital home if my ex. can afford to buy me out. Is there a tax liability there?
Submitted: 8 years ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 2 hours by:
5/2/2009
Tax Professional: Anne, Master Tax Preparer replied 8 years ago
Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2,439
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
Verified

HiCustomer/p>

 

Thank you for using justanswer. You've actually asked a few different questions here, so let's take them one a time.

 

Since IRS really has no way to know who is actually entitled to claim the children on their tax retun, they will honor the claim they receive first. However, this does NOT stop you from also filing for the children. (you will have to mail the tax return instead of elelctronically filing it however) If you have already filed your return, you may amend it by filing Form 1040X .

 

Unless there is something in your divorce decree that states your ex may claim the children on alternate years, then the custodial parent is the person enetitled to claim the children and all of the tax credits associated with them, such as the Child Tax Credit or the Earned Income Credit if applicable.

 

Once you send in a return claiming the children, the IRS will notify both you and your ex that more than 1 person claimed the same children, and would 1 of your like to amend and remove the children as dependents. If neither of you does, then the IRS will send out a packet of information designed to gather information to see who is really entitled to claim the children. The packet will contain such things as whose name is XXXXX XXXXX school records as being the custodial parent, what neighborhood do the children attend school in, who gets notified if there's an accident, who goes to parent/teacher conferences, who takes them to the doctor,, etc. If you are receiving any aid from the state, such as food stamps or medicaid for exemple, that would be an excellent proof of where the child's main home is.

 

If it is determined that you were in fact entitled to claim the children, then your claim will be honored, and your ex will have to pay back any money he was paid for associated with claiming the children. Please see below for more in depth information:

 

<table border="0" cellspacing="0" cellpadding="1">Publication 501 (2008), Exemptions, Standard Deduction, and Filing Information

 

As for the land you purchased from your sister, and are now selling back to her, the capital gains tax law no longer allow you to "defer" or postpone paying the tax just because you reinvest it. I'm assuming you owned the land for more than a year, which makes the profit on the sale eligible for the lower capital gains tax rate (15%).

 

Tax Facts About Capital Gains and Losses

 

Finally when it comes to your family home, since in effect your ex is buying you out, there should be no tax consequences as long as your owned and lived in the home at least 2 out of the last 5 years. Again, please see below:

 

Publication 523 (2008), Selling Your Home

 

Excluding the Gain

 

I hope this helps.

 

 

Ask Your Own Tax Question
Customer reply replied 8 years ago

I am asking about putting the money from the land in PA. to a like-kind exchange of a house that I would rent to a friend. Can I do that and not pay capital gains? Also, anything else I should know?

Thanks,

Anita

Tax Professional: Anne, Master Tax Preparer replied 8 years ago

Hi again

 

Yes, its possible for you to enter into a 1031 exchange which would defer the tax on the property, but there are some pretty strict rules you need to follow.

 

First, in order for a sale to qualify for a 1031 like kind exchange, there are some specific rules/guidelines that must be followed. The 1031 exchange rules lay down a guideline for the proceeds of the sale. The proceeds from the sale must go through the hands of a "qualified intermediary" (QI) and not through your hands or the hands of one of your agents or else all the proceeds will become taxable. The entire cash or monetary proceeds from the original sale has to be reinvested towards acquiring the new real estate property. Any cash proceeds retained from the sale are taxable.

 

 

The second fundamental rule is that the 1031 exchange requires that the replacement property must be subject to an equal or greater level of debt than the property sold or as a result the buyer will be forced to pay the tax on the amount of decrease. If not he/she will have to put in additional cash to offset the low debt amount on the newly acquired property

 

There are also some strict time limits involved (180 days from the time of the sale of 1 property to acquiring the other property)

 

Additionally, if you enter into a related party 1031 exchange and one of you sells the property acquired in this exchange within the first 2 years, you may lose the non tax recoginition of the 1031 status.

 

Please see below:

 

1031 Exchange | Asset Preservation, Inc. | 1031 Tax Deferred Exchange ...

 

Related Party 1031 Exchanges: Caution Needed in These Transactions

 

I hope this helps.

Ask Your Own Tax Question
Ask Anne Your Own Question
Anne
Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2,439
2,439 Satisfied Customers
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses

Anne is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,338 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,980 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
As per the new tax law, the property tax deductions of 10000
As per the new tax law, the property tax deductions of 10000 is it per property or per tax payer per property?If both wife and husband file together can they claim 20000 towards one property or just 1… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Divorce decree states we each get to claim a child for our
Divorce decree states we each get to claim a child for our income taxes, but she is refusing to fill out the form for me to be able to claim a child. Thanks, Bill… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,777 satisfied customers
Is it tax fraud to pay employess under the table. so that
is it tax fraud to pay employess under the table. so that they can still receive payment from social security benefits. … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,777 satisfied customers
On form 1041, capital gains have to be taxed at the estate
On form 1041, capital gains have to be taxed at the estate level, correct? No distribution deduction may be taken?… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I need to know about TN family law in regards to divorce. My
I need to know about TN family law in regards ***** ***** My husband lives in TN in a home that is in my name and has a mortgage that he has paid for since I purchased it in 2006. He couldn't and stil… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
What are the turm capital gains tax on properties that are
what are the long turm capital gains tax on properties that are in germany? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,980 satisfied customers
The 2018 tax law will allow homeowners to deduct property
The 2018 tax law will allow homeowners to deduct property taxes and either income or sales taxes with a combined limit on these deductions being limited to no more than $10,000. What does this mean? w… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,980 satisfied customers
I'm working to understand capital gains tax for California
I'm working to understand capital gains tax for California property purchased 4 years ago. It's a primary residence, purchased 4 years ago for $385k with $285k principle outstanding. Expected sale price of $630k … read more
abci168
abci168
Principal
27 satisfied customers
I'm canadian who want to understand capital gains tax rate.
Hi, i'm canadian who want to understand capital gains tax rate.I have a rental house that i bought at 500K. I sold it after 9 yrs at 1100K. With the money, i bought a new house (will be my primary res… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,777 satisfied customers
Figure out how much is my tax liability + my capital gains +
Figure out how much is my tax liability + my capital gains + depreciation recapture tax … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
For a ny state partnership tax return, if you file an
For a ny state partnership tax return, if you file an extension but don't pay anything and then end up owing a lot. Do they still recognize the extension or do they charge a failure to pay penalty (fo… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Are you familiar with Capital Gain taxes on rental property?
Are you familiar with Capital Gain taxes on rental property? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I sold a rental property at a loss (no capital gains);
I sold a rental property at a loss (no capital gains); however should I pay the $133,000 on the principal of my house I owe 166,000 at 2.8% or buy another rental? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Tax question is there anyway to offset a capital gain of 60
Tax question is there anyway to offset a capital gain of 60 to 70k by buying another commercial property… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Estate capital gains tax rate for 61, single, unable to
estate capital gains tax rate for 61, single, unable to work, is claimed as a dependent form sister,only income collects $500 month stipend from gov., which pays for health insurance and meds. is gett… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Living separately but filing jointly with a child dependent.
living separately but filing jointly with a child dependent. While fulfilling all but one requirements for the EIC and CTC, am I entitled for this credit (and child credit as well) when I fail on the … read more
abci168
abci168
Principal
27 satisfied customers
Do Florida residents have to pay State capital gains taxes
Do Florida residents have to pay State capital gains taxes on the sale of FL business &/or personal assets?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,777 satisfied customers
Second opinion] Has the tax rate in Peru on capital gains
Second opinion] Has the tax rate in Peru on capital gains for non residents recently been changed? I heard it is now 5% and no longer 30%.… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x