Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
Jebuskrist
New Member

I was gifted land 30 years ago and I sold it what sort of taxes do I pay? It sold for 20k+ more than its worth

Sold in alaska and live in OK If it helps
5 Replies
rjs
Level 15
Level 15

I was gifted land 30 years ago and I sold it what sort of taxes do I pay? It sold for 20k+ more than its worth

It doesn't matter what it's worth now. What matters is how much you sold it for, and how much the person who gave it to you paid for it. Your taxable profit is the difference between those two numbers. It's a long-term capital gain, so the federal tax rate will be lower than the rate for ordinary income.


Since Alaska has no state income tax, you don't have to worry about Alaska tax. The profit will be included in the taxable income on your Oklahoma tax return.

 

Jebuskrist
New Member

I was gifted land 30 years ago and I sold it what sort of taxes do I pay? It sold for 20k+ more than its worth

Okay so I got it from my dad and he paid 5 grand for it and did 5 grand worth of improvements. Do the improvements play a part in it?

Mike9241
Level 15

I was gifted land 30 years ago and I sold it what sort of taxes do I pay? It sold for 20k+ more than its worth

what it's worth currently is not relevant.

here are the tax rules

To figure out what to use to figure gain/loss  you must know three amounts:

1) The donor's adjusted basis just before the donor made the gift.
2) The fair market value (FMV) of the property at the time of the gift.
3) The amount of any gift tax paid on the gift (Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return).
A) If the FMV at the time of the gift is less than the donor's adjusted basis, your adjusted basis depends on whether you have a gain or loss when you dispose of the property.

A1) Your basis for figuring a gain is the donor's adjusted basis, plus or minus any required adjustments to basis while you held the property.
A2) Your basis for figuring a loss is the FMV of the property at the date of the gift, plus or minus any required adjustments to basis while you held the property.
A3) If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither a gain nor loss.
B) If the FMV of the property at the time of the gift is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis just before the donor made the gift. to that you would add any required adjustments while you held the property 

 

what if you don't know the donor's basis and FMV at the date of the gift?  then your probably going to have to hire an appraiser to get the FMV at the date of the gift.  what the appraiser may not be able to do is tell you the donor's basis if you have no documentation. then you'll need to consult with a tax pro. 

 

rjs
Level 15
Level 15

I was gifted land 30 years ago and I sold it what sort of taxes do I pay? It sold for 20k+ more than its worth


@Jebuskrist wrote:

Okay so I got it from my dad and he paid 5 grand for it and did 5 grand worth of improvements. Do the improvements play a part in it?


Yes, the improvements are added to the basis. So your father's basis was $10,000. I don't know what the gift tax exclusion was 30 years ago, but he probably didn't pay any gift tax, so there's no adjustment for that. (If your father is still alive you can ask him if he paid gift tax.) If you made any improvements after you became the owner, you add the cost of those improvements to your basis, too.

 

Opus 17
Level 15

I was gifted land 30 years ago and I sold it what sort of taxes do I pay? It sold for 20k+ more than its worth

Your capital gain is the difference between the selling price and the cost basis, which is your fathers original purchase price plus cost of improvements.  Because you owned the property more than one year, this is tax as a long-term capital gain at 15% or 20%, depending on your other income.  It will also be tax as ordinary income in your home state, because most states don’t have separate capital gains tax rates. When you file your tax return and report the capital gain, don’t include proof of your cost basis, but keep it with your other tax papers for at least six years in case of audit.

 

You can also include as adjustments to your cost basis, certain closing costs associated with the purchase and sale of the land. These closing costs are described on page 8 of IRS publication 523.  This includes your real estate commission and certain government imposed taxes and fees.  https://www.irs.gov/pub/irs-pdf/p523.pdf

You probably received a 1099-S statement at the closing which lists the selling price.  Because of how IRS computer matching works, you will need to list the selling price from the 1099S as your selling price, and apply any adjustments to the cost basis, rather than reducing the selling price.  In other words, if you sold the land for $50,000 and paid a $3000 real estate commission, report your selling price as $50,000 and your cost basis as $13,000, instead of reporting the selling price as $47,000 and your cost basis as $10,000.  The result comes out the same, but the IRS computer wants to see the selling price from the 1099S on your tax return.

 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Dynamic AdsDynamic Ads
Privacy Settings
v