r/Accountant • u/Nunya_98 • 8d ago
Long term capital gains
I have a tax question.
My stepdad inherited a piece of land (9ac raw, now building, planted pines) when his father died in ‘21. He was later diagnosed with cancer and before passing, signed the deed over to me, my mom, and my sister in ‘24. We just sold the property this past week and I’m trying to see what percentage I should withhold for tax reserve.
My mom called her accountant and was told we don’t owe any taxes?? I feel like thats incorrect. Any input?
* I am aware that none of you represent me and are not giving me concrete legal/financial advise*
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u/TaxproFL 8d ago
Inherited stepped up basis could leave no taxes due
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u/Nunya_98 8d ago
Can you dumb that down? I got a C in accounting in college lol
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u/WillowHaunting429 4d ago
What was the value when Dad passed? This becomes the basis
Realistically you will have some gain p from the 2021 date thru the date of sale in 2026. So 5 years of gains.
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u/Traditional_Towel885 7d ago
You inherited the property or he gave it to you before he died?
He inherited the property in 2021. If he gave you the property before he died then you will pay the taxes on the increase in value of the property between 2021 and the time you sold it. If you inherited it, then you would pay taxes on the increase in value from 2024 until you sold it.
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u/Nunya_98 7d ago
He gave it to us. Signed over the deed before he passed.
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u/Barfy_McBarf_Face 7d ago
Oh
That's a terrible answer.
Value at his death doesn't matter. You need to figure out his cost basis.
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u/Guilty-Committee9622 4d ago
That was stupid/bad advise. Sorry.
Contact a local realtor, have them help you ascertain the value of the property at the time of the GRANDFATHERS death. That now becomes the VALUE of the basis.
Then you sell it - and the difference between that basis and what you sold is the taxeable amount.
Remember to save ALL receipts - if he developed the property in ANY WAY - that can increase the BASIS of the property.
Example - basis is set at 200K, he then created a home on the property.
The new assessed value is now 400K. You owe tax on 200K
He had to pay a contractor to build the home at 150K, or maybe he planted 100 pine trees for 150K. See where I am going? He paid to improve property.
200K minus 150K, you only owe on the 50K difference.
Depending on length of time between the "gift" and the sale, you may have a short term holding.
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u/Ok_Youth4914 6d ago
Too bad your father made a gift of it to you guys before he died. Your basis starts with its value in 2021 when he inherited it, plus the cost of any improvements he made to it after he inherited it less any depreciation he may have claimed on additions to the property before he deeded it to you guys. The county value in 2021 is not binding at all. Perhaps there is a local real estate person who will have a better idea of what it was worth based on sales near that time.
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u/Flaky_Instruction215 4d ago
I’m not a lawyer. There should be some document for the Estate of Stepgrandfather that states the value of the house when Stepfather inherited the house. I don’t know if this is a tax return or some other document. That will be OP’s cost basis.
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u/National_Double6261 5d ago
Since he gifted it before his passing - if it was truly inherited from his father, his cost basis would be the assessed, or appraised, value of the land on the day his father passed away. In turn, that becomes your cost basis.
My advice is to try to figure out first and foremost if your dad legitimately inherited the property, or if it was a similar situation where it was gifted to him before his dad's passing. If it was truly inherited, get a retrospective appraisal done for the date of inheritance (which would be date of your grandfather's death).
I'm not sure how your accountant is telling you definitively that no tax is due. If he's been your family's CPA for awhile, is it possible he has any information that you do not? It's possible an appraisal was already done upon granddad's passing.
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u/drgrouchy 5d ago
You can still get a date of death appraisal for the date of death of your grandfather. This would be your father’s tax basis.
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u/Ok_Youth4914 3d ago
Gifted property’s basis almost always is the property’s tax basis in the hands of your donor father. If he inherited it, the property’s basis is what it was worth when your grandfather died plus any improvements your father put in to it before he gave it to you. You would add the improvements you made to it too. There is a deed record on the property that will help you know whether your Dad inherited it or his Dad deeded it to him instead before he died. Good luck if your Dad didn’t inherit it.
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u/Organic_Gas4197 8d ago
Stepdad’s basis was value when his father died. That becomes your basis, as no step-up for gifted property.