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My parents are elderly and own a 108 acre farm in Wiscosnin…

My parents are elderly...

My parents are elderly and own a 108 acre farm in Wiscosnin that they bought in 1954. We created a revocable trust that holds the farm. My brother wants to buy 20 acres. My question is this: My parents bought the farm for $45,000 and maybe put another $20,000 into it. We are thinking of selling the 20 acres to my brother at $65,000.00 This is the current assessed per acre value per their property taxes . My parents are ages 102 and 95. What would be the tax consequence of this sale?

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Answered in 11 minutes by:
3/19/2018
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,115
Experience: Taxes, Immigration, Labor Relations
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First of all - I suggest to verify if that is a revocable trust - if so - all assets held in the trust are still considered as owned by your parents - and the sale transaction will be reported on their tax return.

You will need to allocate the basis to that parcel they plan to sell - and will calculate the gain.

That will be long term capital gain - taxable at reduced rates - depending on their income - it may be partially taxed at zero percent and partially at 15%

.

If indeed - that is an irrevocable trust - the trust will report the sale transaction - and while tax rates are same - tax brackets are normally higher for the trust compare to physical persons.

On the other hand - when proceeds are distributed to beneficiaries of the trust - the taxable gain is passed as well - and not taxed fro the trust - instead - it will be taxed for beneficiaries.

Let me know if you need any help with reporting.

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Lev
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