Capital gains rate on sale of inherited home

[gooddog]

Quote:

Originally Posted by Camas Lilly If I keep our taxable income below the 15% capital gains tax level, and if cash I receive from sale of inherited home is not considered income, do I have to pay 15% capital gains tax on that portion of the money that is considered gains?

If the home is inherited, and you had an appraisal done, then you should be OK on taxes - or has that part of tax law changed? It is worth noting that when a property is inherited, it is wise to get an appraisal within 30 days of title.

[hotwired]

Definitely on the appraisal or at least a broker's opinion. My dad had a broker's opinion of value done on his 6-unit apartment building in key West just before he died, I inherited it, ended up selling it for $200,000 less than that appraised or estimated value and was able to use that Capital loss carryforward for about seven years. It was the most ridiculous home run I'd ever been offered tax-wise. Some might say my accountant toed the line but I researched it a little and it came up legit.

[pb4uski]

What caused the $200k loss?

[Gill]

Quote:

Originally Posted by hotwired Definitely on the appraisal or at least a broker's opinion. My dad had a broker's opinion of value done on his 6-unit apartment building in key West just before he died, I inherited it, ended up selling it for $200,000 less than that appraised or estimated value and was able to use that Capital loss carryforward for about seven years. It was the most ridiculous home run I'd ever been offered tax-wise. Some might say my accountant toed the line but I researched it a little and it came up legit.

Yes, if you sold it within a reasonable time you pushed the limits. The sale price should have been the basis being a better reflection of fair market value at date of death.
Gill

[pb4uski]

^^^ +1 because the actual sale price shortly after death is more indicative of the fair value than the brokers value analysis.

[hotwired]

Quote:

Originally Posted by pb4uski What caused the $200k loss?

The "broker's opinion" was 200K more than we sold it for a few months later. therefore the tax situation was that I sold something that I "paid" 200K more for than I sold it for.

[dixter]

it is entertaining reading all of the " experts " opinion on these subjects... just read them and take away what might or what might not work for the OP...

funny about taxes... everyone seems to do their own taxes their own way...

[pb4uski]

Quote:

Originally Posted by hotwired The "broker's opinion" was 200K more than we sold it for a few months later. therefore the tax situation was that I sold something that I "paid" 200K more for than I sold it for.

More likely is that the broker's appraisal was unrealistic... values rarely change that dramatically in a short period of time. As long as you don't get audited your good.

[Gill]

Quote:

Originally Posted by hotwired The "broker's opinion" was 200K more than we sold it for a few months later. therefore the tax situation was that I sold something that I "paid" 200K more for than I sold it for.

The IRS takes the position that a sale within a reasonable time after date of death is more reflective of fair market value than any appraisal done as of the date of death. The sale price should have been used for the basis and the expenses of sale would result in a loss. A "broker's opinion" isn't going to hold water with the IRS in this fact situation. The
IRS will clearly ignore the appraisal. I'll bet you might have taken a different position if you had sold the property at a $200K gain.

Gill

[RetiredHappy]

Quote:

Originally Posted by Gill The IRS takes the position that a sale within a reasonable time after date of death is more reflective of fair market value than any appraisal done as of the date of death. The sale price should have been used for the basis and the expenses of sale would result in a loss. A "broker's opinion" isn't going to hold water with the IRS in this fact situation. The IRS will clearly ignore the appraisal. I'll bet you might have taken a different position if you had sold the property at a $200K gain. Gill

+1. Taking a $200K loss will fail IRS audit if they decide to audit.

[Gill]

Quote:

Originally Posted by RetiredHappy +1. Taking a $200K loss will fail IRS audit if they decide to audit.

The acquisition date is date of death so it will be highlighted by the fact the property was only held a few months for a substantial loss, particularly in a period of generally rising real estate prices.
Gill

[hotwired]

Well this was 2007 so hopefully all is well. I can't remember dates exactly but I'm pretty sure the time lapse between the broker opinion and the acceptance of the sales offer was a good solid year or more. Our accountant at the time was very popular in our city, one of the big guns so to speak so I'm sure he covered our bases. My details are a little fuzzy after All these Years anyway. But that's the gist of it.

[Gill]

Quote:

Originally Posted by hotwired Well this was 2007 so hopefully all is well. I can't remember dates exactly but I'm pretty sure the time lapse between the broker opinion and the acceptance of the sales offer was a good solid year or more. Our accountant at the time was very popular in our city, one of the big guns so to speak so I'm sure he covered our bases. My details are a little fuzzy after All these Years anyway. But that's the gist of it.

Well obviously it worked out for you. Many things slip by the IRS when there is no audit. If it was a year or more you were probably on solid ground. That certainly wouldn’t fly in the more typical sale a few months after death.
Gill