guy_weeks[at]hotmail.com (GLWeeks) wrote:
- quote -

Bumping to get thoughts on last post... Thanks

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guy_weeks[at]hotmail.com (GLWeeks) wrote:
- quote -

If he used it as rental property, he should have deducted
cost recovery (depreciation) on it each year. The
depreciation allowed or allowable (even if not claimed)
during the period the property was rented reduces his basis
in the property and will increase his gain.

The basis is the FMV of the property at the date of his
mother's death, plus the cost of capital improvements, minus
depreciation allowed or allowable. The difference between
the sale proceeds and his basis is taxable gain.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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"BMS" <mcfarland[at]yahoo.com> wrote:
- quote -

She willed it to him.. It was in her name.. No, he's always
used it as rental property. She used it as rental property
also...

Thanks for the info!

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"GLWeeks" <guy_weeks[at]hotmail.com> wrote:

- quote -

How did he inherit it?

Was it in the mother's name or was he on the deed as well?

Has he lived in it?

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guy_weeks[at]hotmail.com (GLWeeks) wrote:

- quote -

The best thing that he can do is will it to someone and when
he passes away, the heir sell it quickly. This way the heir
picks up the FMV on the date of death. Thus no tax is due.

Missy Doyle

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GLWeeks wrote:

- quote -

Any gain on the house will be calculated based on his
"basis", normally what you might call "cost", and in this
case is the fair market value (fmv) of that house when his
mother died in 1987. So then, now is the time to establish
that value. Perhaps a local real estate appraiser could
help, or the county court house might have some helpful
valuation information back that far.

BTW, does your father in law live in that house?

ChEAr$,
Harlan Lunsford

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34% sounds too high. Unless the house was a rental. Capital
gains rates run from 28% to 5% depending on the type of
property and the other income. It is on the PROFIT which is
the gross sales price less cost of sale less the value of
the house in 1987and less all improvements made.. If it was
a rental, you have to add back all depreciation taken and
should probably get a professional to figure it.

Nan, EA in LA

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guy_weeks[at]hotmail.com (GLWeeks) writes:

- quote -

Maybe. If it's been his personal residence any time during
the last 5 years, see IRS Publication 523. If not, he'll
have a long-term capital gain equal to the difference
between his net sale receipt and his basis (value at the
time of inheritance plus capital improvements). See IRS
Publications 550 and 551. If there is a taxable gain, the
maximum Federal tax rate on it is 15%.

Phil Marti
Topeka, KS

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"GLWeeks" <guy_weeks[at]hotmail.com> wrote:

- quote -

Has he lived in this house 2 years out of the last 5? What
kind of auditor told him he would pay 34%. Is he single or
married? Will the profit from the sale be $250,000 or
greater? All of these come into play in a situation like
this.

Wayne Brasch, CPA, M. S. Taxation

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Guy Weeks posted:

- quote -

First of all, your father-in-law also inherited a "cost
basis" in the house -- based on its Fair Market Value as of
1987. Any tax due will be based on the difference between
that figure and what he realizes from the sale (profit).
There is also the opportunity to increase that cost basis,
to reflect any improvements made to the property over the
past 17 years. If the deed transfer has no information on
fair value, local realtors or the county assessor should
have records that can provide an answer.

Your information lacks some specifics:

1. Did he live in the house, as his main residence?
-- If so, and he has continued to do so up through at least
two of the last five years, then there is _no tax due on the
first $250,000 of profit ($500,000 if MFJ). And, if this
were the case, there would also be no need to report the
income or the sale.

2. Did he rent the house to someone else?
-- If so, presumably he was reporting the income on his
returns. He should have been using Schedule E, and he
likely took depreciation. That would affect his profit, and
the tax due. This becomes complex (especially if rental
income wasn't properly reported) ... and a tax professional
would be recommended.

3. Finally, if the house did not produce any income, and
sells for more than the cost basis, then there will be a
profit -- reportable as a long-term gain on Schedule D. The
current maximum long-term tax rate is 15%. But it starts at
a lower percentage, depending on your father-in-law's total
income. Proper completion of the Schedule D will result in
an exact determination of the tax rate.

However, the 34% figure was wrong: the right answer, for
Federal taxes, is 15% -- at most. I have no knowledge of
Mississippi state taxes.

Bill

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Hello all... Need a little help...

My father-in-law is wanting to sell a house that was passed
down to him from his mother in 1987. Is he going to have to
pay some sort of 'tax' when he sells it? An auditor told him
something like 34%.... My father-in-law is 70 years old and
lives in Mississippi if that helps. We were just trying to
get the low down on it and maybe try to find a way around
having to pay such a high percentage.

Thanks!

Guy

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