Property gifted, then inherited, then gifted again with no original sale price documents.

[TaxTime13]

Hello,

I just sold land that was gifted to me by my mother for $180,000. My mother inherited the land from her husband (my dad) when he died. Her husband was gifted the land from his dad (my grandfather).  My grandfather bought the land in the 40s, but there is no record of the sale in the county books. There is no record of the original purchase price. We cannot determine the donor's adjusted basis.

How much capital gains do I need to report/pay?

Is there a work around to get the donor's adjusted basis?

Helpful info:

I have had the land for more than a year.

I am filing as married.

Income: $180,000.00

Thank you for your thoughts.

[tagteam]

The threshold question concerns the title status of your mother and her husband (your dad).

Did they hold title jointly or did your father own the land in severalty (i.e., he, alone, was on title)?

[tagteam]

In which state did they reside when he passed and in which state was the property located?

[TaxTime13]

The land was in my father’s name alone. He left it to my mom and she inherited the property as executor in 2016. The property was then gifted to me in 2018. 

thanks,  

Thad

[TaxTime13]

Georgia. 

thanks, 

Thad

[tagteam]

Then you would take the lesser of your Mom's basis or the fair market value on the date of the gift (i.e., the date she gifted it to you).

Your Mom's basis would be the fair market value on the date of death of your father.

This is actually more simple than it would be in most instances. You merely need to determine the fair market value on the date your father passed and the fair market value on the date your Mom gave you the property. Use the lesser of the two as your basis.

[TaxTime13]

Thank you! This is what I was hoping.

Quick question about the fair market value. Is this the fair market value stated on the annual property tax bill?

Someone else recommended to hire an appraiser to get something that I could reference for the basis, however, that would most definitely be higher than what is stated by the county. Also, there is the cost of hiring an appraiser. Do you see any need for this?

Thanks again for your thoughts.

[Opus 17]

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@TaxTime13 wrote:

Thank you! This is what I was hoping.

Quick question about the fair market value. Is this the fair market value stated on the annual property tax bill?

Someone else recommended to hire an appraiser to get something that I could reference for the basis, however, that would most definitely be higher than what is stated by the county. Also, there is the cost of hiring an appraiser. Do you see any need for this?

Thanks again for your thoughts.

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You should hire an appraiser, it will be worth the tax savings to properly document the basis.  Property tax bills are very unreliable as indicators of fair market value for many reasons, and if you are audited, the auditor will know this.   Under the law, the IRS does not have to accept any basis that you can't prove with reliable records.  If the auditor thinks your property tax bill is not the fair market value, the auditor can assign any lower basis they believe is reasonable, and then you would have to appeal to the Tax Court, at which point you will need the appraisal anyway.  

[tagteam]

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@TaxTime13 wrote:

...Do you see any need for this?

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Yes. I agree that it would be wise to hire a licensed real estate appraiser since the IRS prefers the opinion of value in that type of report. 

You might be able to get away with a CMA from a licensed real estate agent/broker, but a certified appraisal would be close to indisputable and since this appears to be raw land the cost should be relatively minimal.