Inherited land

[prattmp]

My wife inherited land (1996) from her brother after his death (in kind).  At that time she was under the impression she owned all 3 lots.  When she tired to sell the land it was discovered she only owned 1/2 of the 3 lots.  Went to court to acquire the other half and no one contested the acquisition of the other 1/2.  My question is how does she split the value of the land?  When she went to the court house to file (1996) they asked her the value of the land and she said $3500.00.  When it was sold in 2022 the value was $79,500.00.  How do we file for this sale?  Half of the land at $39,750 at original valuation and the other half at $39,750 at todays value.  I hope this makes sense and is understandable.......Regards

[rjs]

First of all, what your wife said the value was in 1996 is meaningless. You need a professional appraisal (not a real estate agent's estimate) as of her brother's date of death. A professional appraiser can give you a retroactive appraisal.

You need a lawyer to examine the relevant documents and figure out when and how your wife actually acquired the property. It's not clear whether it was an inheritance, gift, purchase, or something else. What the old deed or title said might not establish actual legal ownership. Who was the other owner? Why did the other owner not contest her acquisition of their share? You might need both a real estate lawyer and a tax lawyer.

[Opus 17]

Agreed, too much is unclear.

Without doing more investigation, the basis she can currently prove is half the fair market value in 1996.  If audited, you would need a valuation from a qualified person, not a guess.  A real estate professional can use historical records to tell you what the fair market value was.

To improve her basis, we would need to know more, such as why she only inherited half. Who had the other half?  Maybe her brother "constructively" owned the entire property even if not on paper, so your wife "constructively" inherited the whole thing.  That would require legal advice and research into the situation.  

Before starting, you probably want to think about how much tax you would save if you could prove she inherited the whole property in 1996 and got the entire FMV basis instead of half.  If it would cost more in attorney fees to investigate and prove a higher basis than the tax you would save, it might not be worth pursuing.