Determining Cost of Land for an Asset

[david-r-mullinax]

I have property that I inherited from my great grandfather that I run cows on and plant pecan trees.  I did not purchase this property other than winning a settlement in court a few years ago.  I am entering an asset:

Farm Equipment, Animals, Agriculture

Trees and Vines bearing fruit and nuts, orchards

Date planted: 03/13/2022

On the fourth page, I describe my asset, put down a dollar amount (cost).

Now it is asking me the cost of land.  I didn't purchase this.  What would I enter here?  Would I need to do a fair market appraisal?  Enter how much it is worth on the property taxes?  Or leave this blank?

[Carl]

I can not help here, as this is considered farm land and I'm not familiar enough with the tax rules on farm land. But I do know that more details are needed to ensure you "do" get valid and correct information.

You say you "won" this as a settlement in court. Is this a case that is treated as you inherited it from your grandfather after his passing? If not, then why was it "won" by you? Settlement for something else maybe?

Typically, when you inherit real estate, it's cost basis for the beneficiary recipient of the inheritance is the FMV of the property on the date the person it was inherited from, passed away. So if not inherited, that may not come into play here in determining your FMV.

[DavidD66 · Accepted solution]

Your cost basis for the land you inherited is the value of the land on the date you inherited it.  Property tax values are not an accurate valuation of real property values, but that would be one place to start.  You look for sales of similar properties around the same time you inherited the land.  If you were to sell the property, you would an accurate valuation to determine your gain or loss on the sale.

[david-r-mullinax]

Further clarification on your question.

My great grandfather passed away "intestate", meaning he never left a will.  Long story short, I paid the taxes on it for 20 years, hired an attorney, got the case in court, paid off some cousins and the court registry, and got title from the judge.

My great grandfather passed away in 1954.  I'm sure back then an acre of property was a few hundred dollars compared to today.

[Carl]

I'm sure back then an acre of property was a few hundred dollars compared to today.

Be aware that I am by no means a legal expert. As I see it, your cost basis is the FMV on the date of his passing. As support on that assessment/assumption, I see the fact that you paid property taxes on it (and can prove it) for the last 20 plus years, thereby "treating it" as if you had already inherited it.

I'm fairly certain that to that cost basis you can add any and all costs incurred in the process of getting your name on the deed. So that would include all legal costs along with whatever you paid to the cousins and other relatives.

As to weather you would be required to issue some type of tax reporting document to the cousins you paid as "proof" of your cost basis valuation, you might want to check on that, as I really can't be sure. Either a real estate attorney (not an agent) or maybe a tax attorney (not a CPA or EA) should be able to clarify that.

All my above comments are not based on any facts that I can cite or prove.