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Posted by mac on January 26, 2007, 5:58 am
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A lady age 95 dies, leaving a house and land which she
inherited 25 years ago. Her Will says: the house and land
valued at approx $90,000 is to be sold, all her expenses
paid then, whats left of the money to be divided among
neices and nephews. Questions: How will the Basis be
decided? Who will have to pay taxes and when? What can be
done to reduce taxes after her death?
Thanks,
Mac
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Posted by Phil Marti on January 27, 2007, 12:30 am
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> A lady age 95 dies, leaving a house and land which she
> inherited 25 years ago. Her Will says: the house and land
> valued at approx $90,000 is to be sold, all her expenses
> paid then, whats left of the money to be divided among
> neices and nephews. Questions: How will the Basis be
> decided? Who will have to pay taxes and when?
The basis is the property's value at the date of death, so
there won't be any gain to report, assuming things move
along.
--
Phil Marti
Clarksburg, MD
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
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Posted by Bill Brown on January 27, 2007, 12:30 am
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> A lady age 95 dies, leaving a house and land which she
> inherited 25 years ago. Her Will says: the house and land
> valued at approx $90,000 is to be sold, all her expenses
> paid then, whats left of the money to be divided among
> neices and nephews. Questions: How will the Basis be
> decided? Who will have to pay taxes and when? What can be
> done to reduce taxes after her death?
The basis in the house and land is their fair market value
on the day the 95 year old dies. Besides a possible estate
tax return (if the 95 year old was quite wealthy), an estate
income tax return may also have to be filed. If there are
any taxes due, the estate pays them.
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Shyster1040 on January 27, 2007, 12:30 am
Please log in for more thread options As a general rule, and with the caveat that, based on all of
the facts, there may be wrinkles and exceptions that apply
in your case that aren't apparent from the facts you
described, the basis will be either the fair market value at
the date of death, or at the alternate valuation date chosen
by the executor if s/he makes the proper election (generally
6 months after death).
Thus, if the FMV is $90k at death, and the property is sold
for $90k, there will be no taxable gain on the sale. While
the $90k will be added to the estate for estate tax
purposes, unless the unified credit has been used up, that
$90k shouldn't be subject to estate tax.
If the property is sold for more than $90k, because the
estate is required to distribute all of the proceeds to the
beneficiaries, as a general rule the beneficiaries will be
taxed on their share of the gain from the sale. Conversely,
if the property is sold for less than $90k, the
beneficiaries will report their share of the loss.
If the property is expected to sell for more than the value
it will have on the date of death or the alternate valuation
date, one alternative would be to have the lady sell the
house herself and exclude all gain on the sale under Sec.
121 (provided she otherwise qualifies).
Of course, the downside to that is that she will still need
a place to live, and will have to spend some of the proceeds
to rent a place (unless one of the rellies is willing to
have her live with her/him).
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by joetaxpayer on January 27, 2007, 12:30 am
Please log in for more thread options mac wrote:
> A lady age 95 dies, leaving a house and land which she
> inherited 25 years ago. Her Will says: the house and land
> valued at approx $90,000 is to be sold, all her expenses
> paid then, whats left of the money to be divided among
> neices and nephews. Questions: How will the Basis be
> decided? Who will have to pay taxes and when? What can be
> done to reduce taxes after her death?
The value is well below anything that triggers estate tax.
After expenses, no tax will be due. Basis steps up to market
value on death. (Is the rest of her estate over $2M?)
JOE
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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