Tax Question

[ageecee]

if you sell a house that you inherited and are selling it below what the house is worth are you taxed on the sale?

 

[saint]

i have no idea but i can't imagine it would be that easy to avoid the taxes on it.

 

[pug]

edit

 

[ageecee]

Had a realtor look at the house and said he wouldnt have a problem listing it at 250K but never actually got an appraisal of the house. Selling it for 210K so i guess thats a loss of 40K.



Am i taxed?

Went to CPA today but he had left already. Just trying to get some answers before i see him tomorrow.

 

[pug]

edit

 

[freelancc]

you need to have the property appraised by a licensed appraiser. An experienced tax guy knows how to write off the difference.:SIB

 

[pug]

edit

 

[ageecee]

you need to have the property appraised by a licensed appraiser. An experienced tax guy knows how to write off the difference.:SIB

Why do i need to get property appraised?

 

[ageecee]

It looks like this is an arm's length transaction so my discussion of the gift tax would not apply. See my first post regarding this sale. It looks like you will have a capital loss.

No tax on a loss, it is a deduction.

Ok heres a dumb question: What is an arms length transaction?

 

[pug]

edit.

 

[ageecee]

A sale between two people negotiating a sale with equal bargaining power.

A non-arm's length transaction would be, for example, a sale to a family member where the amount of the sale does not accurately reflect the fair market value of the property.

What you are talking about would be an arm's length transaction.

Sorry for the legal lingo.

This is a sale to a family member

 

[pug]

edit.

 

[ageecee]

If that is the case, then I would get an appraisal for the amount of the sale price and keep it in your tax file. If audited you will need to prove the value was the sale price to claim your loss.

Otherwise, see my discussion above regarding the gift tax. Although it is highly unlikely you would have to pay the gift tax(see above), the IRS could use the fact that the property was sold below fair market value to deny your capital loss deduction.

Hopefully I am not confusing you.

Thanks Pug im learning everyday about this stuff

 

[pug]

edit

 

[Franky Wright]

Excellent advice Pug:00hour Where are those green boxes now when you need them:mj07:
Mind if I get your email from Jaek:142smilie Would like to run some ideas past you....

Franky

 

[ageecee]

Thanks again Pug. I would definetely say the house was worth at least 250K upon death but we have no documentation of that.


I will let you know what CPA says today.

 

[just cover]

My sister and I dealt with the same thing when our Mom died. I thought we would be taxed to death on the sale. To make a long story short we tried to sell the house for almost a year after she died all the while keeping it up while she was in long term care. We finally sold it below market value and got to take a loss on it. I believe it was a capital gains/losses.

One other thing, I didn't want to really sell the house and my sister did. It can get real messy so beware. Never in my wildest dreams would I think we would have had problems with this but we did.

good luck

jc

 

[pug]

edit

 

[lostinamerica]

(1) There was no income tax liabilty arising from receipt of your inheritance of the valuable real estate, and you likely incurred no inheritance taxes, either.

(2) The basis of the inherited property for determining a gain or loss on a subsequent sale is the fair market value (FMV) on the date of decedent's death (plus any capital improvements made thereafter). The burden is on the taxpayer to establish the FMV, with an appraisal as a generally accepted method, although an actual sale in an arm's length transaction within a short time after the decedent's death is frequently viewed as being even more persuasive evidence of the FMV at death.

(3) For income tax purposes, your capital gain or loss on the subsequent sale is the difference between the basis and the net proceeds (i.e., after deducting closing costs) received. However, a sale to a related party (i.e., sister) generates a loss that can't be claimed.

GL

 

[ageecee]

Capital loss will be the thing here and CPA said it would be a tax deduction.




Just cover,

Me and my brother and sister inherited the house. We each own a 1/3 of the house. It was my grandfathers house, then my mom moved in the house so its a family house. My brother and wife will buy the house and keep it in the family. So we are all on the same page here so no squabbles here. But yes sometimes these things can get messy. But mom would not want that to happen and im sure shes proud of us they way weve handled this.