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Level 3
posted Sep 6, 2020 11:01:16 AM

How do I report capital gain on land acquired in part by inheritance and in part by gift?

This is a 2020 transaction.

 

We acquired a parcel of empty land a number of years ago that is now being sold. It was previously held by my spouses parents as tenants-in-common and willed by both parents to my spouse and sibling 50% each. It was originally acquired by Dad's parents in the 1940s and passed on as a gift to Dad so that Dad & Mom's cost basis was essentially $0.

 

When Dad died, my spouse acquired 25% ownership (half of Dad's 50%). Our cost basis on that portion would be 25% of the land value at time of death. Mom gave her half equally to my spouse and sibling so then they each owned 50%. We are accepting a cost basis of $0 on the gift portion.

 

My spouse and sibling exchanged ownership of their interest in this parcel with their ownership interest in another parcel so my spouse now owns 100%. Unfortunately neither properties were incoming producing so it can not be treated as a like kind exchange. Sibling's cost basis would be the same 25% of the appraised value at time of Dad's death. So we are considering that our cost basis as Dad's 50% at time of death, and Mom's 50% cost basis at the original 1940s basis of essentially $0, which equals 50% of the appraised value at time of Dad's death.

 

Turbotax H&B Windows has no step-by-step entry for acquisition of an asset that was acquired in part by inheritance and in part by gift (that I can find). The Capital Gain (Loss) Transaction Worksheet could be manipulated by utilizing Part IV sections 6 and 7 and manually entering the inheritance portion and cost basis in section 6 and the gift portion cost basis in section 7.

 

Is this the best way to go about this?

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1 Replies
Level 4
Sep 6, 2020 11:15:29 AM

You've got a gain so............................basis is split and =

25% is the FMV on date of Dad's death

25% is Mom's basis b/c this was a gift and carry over is effectively $0 b/c it's so old

50% is the FMV of the exchange........it doesn't matter that it wasn't like kind.......it's what your spouse gave up in consideration for the other 50%.