Inherited Farmland Question

[ConfusedTaxPerson]

My aunts, and uncles, and I recently inherited farmland from a will from my great-grandmother that was wrote up in the 80's. My aunts and uncles want to sell, but I don't want to sell yet. I am trying to figure out the capital gain tax before hand since I want to minimums this tax since I have no job right now, but I am not getting a clear enough answer from anyone even from my other family member's lawyers and even CPA's that I have talked too. Plus it sounds like I could be forced to sell since my other family members want to sell. Here is the issue. I got the farmland once my mother pass away, but my mother passed away before my grandmother, and my grandmother wrote as the life estate of the farmland till she pass away. From what I understand, the capital gains is the difference from one date to the date of sell. I am trying to figure out what that date would be. I have even heard the date could be even when my distant family got the farmland really long time ago. That is the confusing part that people are running.

[Anonymous]

if you are correct that you and your relatives inherited 100% from your great-grandmother at the date of her death, then the basis would be fair market value at that date.  The basis she got when she inherited it would be irrelevant.  if your CPAs and lawyers can't answer this question find ones that will verify i'm correct. 

if she died recently and the property is sold shortly in the future, unless there's been substantial appreciation between date of death and date sold, there should be virtually no gain.  in many such situations there is in fact a loss because closing cost related to sale are not taken into account in determining fair market value but are taken into account in determining gain 

[ConfusedTaxPerson]

My great-grandmother that had the land and this will passed away about 20 years ago. Then my mother passed away about 10 years ago. Then my grandmother that had it in a life estate passed away just a few years ago. Hope that helps.

[Hal_Al]

You probably need legal help. 

I'm not a lawyer, but my understanding of "life estate" is that the cost basis steps up to the fair market value (FMV) on the date of death* of the person with the life estate (your grandmother) , even though you may have acquired  the title (or partial title) to the property earlier by gift or inheritance.

However,  "my grandmother  passed away just a few years ago", indicates that there may have been some increase in value, that could result in a capital.  But it will be a long term capital gain (all inheritances are long term, regardless of the time you actually owned it.).  But, if you "have no job right now", the first  $39,000 of long term capital gains are taxed at 0%**, the rest at 15%. So, there will  actually be little or no tax on the sale.

*References: 

http://www.njelderlawestateplanning.com/2010/02/articles/estate-and-inheritance-tax/life-estates-est... 

http://www.law.cornell.edu/cfr/text/26/20.2036-1

**Depending on your other income and dependent status

[ConfusedTaxPerson]

It is a part of the state of Iowa in the USA.

That is kinda why it sounds like I might be forced to sell. If I don't sell, they will and can take me to court to do a force. All the lawyer that I have talked said this, and it is 100% legit. Plus I did not get the deed to this land till my grandmother passed away.

Plus I have been looking at values since they want to sell, the value of the land is and has been falling. When I got it to now have dropped $500 to $1000 per acre on the average.

[Hal_Al]

A capital loss is deductible. Even if your income is so low that you have no tax liability, most of the loss can be carried forward and used in future years.