Capital gains on sale of jointly held inherited land

[glen34]

I recently sold a lot held jointly husband and wife after my wife died which my wife inherited and had added me as a joint owner how to figure capital gains. what about step in cost basis?

[Critter · Accepted solution]

Simple math ... here is a what if amounts 

Fair Market Value on the day she inherited = her basis      $10,000

She adds you to the deed so you got 1/2 her basis as a gift   ... you each have $5000

she passes ... 1/2 the fair market value on the day of her death = your inherited basis  FMV = $20,000/2

your current basis = your inherited portion $10,000  + 1/2 original basis $5000 = $15,000

[glen34]

The tax assessment appraisal of a jointly held lot with spouse was $50k when she died. Two months later, lot was sold for $85k. Is my cost basis 1/2 of $50k or 1/2 of $85k?

[Critter]

1/2 of $50

[TaxGuyBill]

What State do you live in?

The tax assessment is usually not the actual Fair Market Value.  It is quite unlikely the lot increased in value by $35,000 (70%) in two months.  It may be a good idea to get an official appraisal.

[glen34]

But the lot sold for $85k— 35k more than the tax appraisal. It seems to me $85k is the true FMV and not what an appraiser thinks it’s worth.

[TaxGuyBill]

I agree, $85,000 is more logical, which is why you may want to get an official appraisal.  Tax Appraisals are often based on valuations 1-2 years prior to the date of the tax statement.

Depending on what State you live in, the step-up in Basis may be different.