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I was given a family heirloom two years ago. Unaware of its…

I was given a...

I was given a family heirloom two years ago. Unaware of its value I decided to look into its value. I learned it was worth over 6 figures. If I sell it do I pay capital gains tax on its total value or just the increase from when it was received?

Accountant's Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?

It is an heirloom passed down four generations. The purchaser is deceased.

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Answered in 1 minute by:
3/20/2018
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 18,221
Experience: 15years with H & R Block. Divisional leader, Instructor
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Hello, I'm Robin. Welcome to JustAnswer. I'm reviewing your question now and typing up my reply. I'll post that in just a few moments.

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You received a cost basis in the heirloom on the date the deceased passed away. This means if the item has increased in value (from the Fair Market Value at date of death) you will only pat tax on the gain ( the difference in FMV and sale price).

Please let me know if you need more information.
If not then please scroll up to see the STARS to rate so I am credited.

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Customer reply replied 4 months ago
Thanks. The actual heirloom was a watch. It’s so rare but a few exactly like it auctioned for $200,000.00 a few years back. We have a private buyer willing to pay 140,000.00. Does this mean we will not have any tax liability?

You need to have an appraisal from the date you inherited and if you sale at a lower price than that you have no tax.

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Did that clarify?

Please let me know if you need more information.
If not then please scroll up to see the STARS to rate so I am credited.

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Customer reply replied 4 months ago
The deceased person passed away in 1978. The watch was given to his only son. He gave it away in 2015 and is still alive. What time line do we use for the valuation?

You would need to look back to 1978 when the father passed away. The son then made a GIFT. That means whoever he gave the watch to retains the son's FMV from 1978.

The FMV in 1978 is used.

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Anything else?

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 18,221
Experience: 15years with H & R Block. Divisional leader, Instructor
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Robin D. and 87 other Tax Specialists are ready to help you
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Customer reply replied 4 months ago
If I can determine the FMV from 1978 what do I do?

Claim $0. The IRS requires you have a cost basis that you can show or you claim $0 which would mean all is taxable.

You can check with an appraiser or auction house. They would have historic data.

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