Sale of inherited land

[Chuckie54]

I live in one state and inherited vacant land in another state.  I sold the land at a profit. I never used the land for anything.

1) Do I list the land sale on Schedule D for my federal taxes?

2) Do I have to pay taxes on the profit in the state where the land was?

3) Do I have to pay taxes on the land sale on my state taxes?  If not will turbo tax delete that information when doing my state taxes or will I have to manually delete the entry?

[Carl]

1) Do I list the land sale on Schedule D for my federal taxes?

yes. Your cost basis in the land will be it's FMV at the time the original owner passed that you inherited it from. So it's perfectly possible, if sold within a reasonable timeframe after the original owner's passing, that you sold it "at" FMV; meaning you no gain or loss, and therefore no tax liability on the sale.

2) Do I have to pay taxes on the profit in the state where the land was?

If that state taxes personal income, then yes. So you may need to file a non-resident return for that state.

3) Do I have to pay taxes on the land sale on my state taxes?

Depends. But most likely yes, if the gain and other figures are high enough.

If not will turbo tax delete that information when doing my state taxes or will I have to manually delete the entry?

When doing state taxes for multiple states, do your resident state tax return last. This is because many states that tax personal income will allow you a credit to your resident state tax liability for taxes you paid to another state. But the program has no way of "knowing" this, unless you complete all non-resident state tax returns before you start your resident state tax return.

[PattiF]

Yes, the land sale will be listed on Schedule D for your taxes. The cost basis of the land would be the value at the time the deceased died. The sale will be entered in the investment section of TurboTax. 

Follow these steps to enter your investment sales in TurboTax:

TurboTax Online

1. Open or continue your return
2. In the search box, search for sold second home and select the Jump to link
3. Answer Yes on the Did you sell any stocks, mutual funds, bonds, or other investments in 2021? screen
   • If you land on the Your investment sales summary screen, select Add More Sales
4. On the OK, let's start with one investment type screen, select Other, then Continue
5. On the Tell us more about this sale screen, enter the name of the person or institution that brokered the sale
6. On the next screen, select Second Home (choose this also for inherited homes) or Land and answer the questions to finish entering your sale

Yes, you would have to report the inherited land sale on a nonresident state return for the state where the land was located.

Yes, you would need to include the sale on your resident state return. You should be able to take an income tax credit in your state of residence