Vacant Land Sale in Arkansas

[TRT411]

Me and my wife have always filed our taxes jointly. In 2013 my wife's mother signed a quit claim deed of the property to my wife. My wife's mother is still living. My wife sold the property and is closing next Monday the 21st of November 2022. We live in Arkansas and the property that  sold is in Arkansas. The closing/title company said my wife will be getting a form 1099. We use turbo tax for a few years now. Will she owe federal and state taxes on the sale? Also will this affect my SSA income?  Thank you.

[leeloo · Accepted solution]

Yes, assuming you had a gain on the sale, that gain is taxable to both the IRS and the state. It will not affect your  SSA income per se, but if the gain is large enough, some of the income may become taxable.

[TRT411]

There was no money involved when my wife received the property back in 2013. Is there a place on turbo tax to enter the sale of this property and approximately how much will the tax be? The property sold for $130K.  

[leeloo]

Since the property ewas a gift, the basis is usually the adjusted basis of the gifter.

To figure out the basis of property you receive as a gift, you must know three amounts:

• The adjusted cost basis to the donor 
• The fair market value (FMV) at the time the donor made the gift
• The amount of gift tax paid on Form 709

If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property.

• Your basis for figuring gain is the same as the donor's adjusted basis plus or minus any required adjustment to basis while you held the property.
• Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustment to basis while you held the property

NOTE: 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 have a gain, you have neither gain nor loss on the sale or disposition of the property.

If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift.