Maxi-Pedia Forum

About 15 years ago, my mom transferred approx. 29 acres of approx. 130 acres she inherited to my only sibling and myself.  A few years later my brother filed paperwork to take his name off this 29 acres..but it never went thru to the county where the land is in Montana. 

I/we recently sold it.  I'm trying to figure out what federal/state capital gains taxes will be on this and after reading online, I'm more confused than ever.  I am in the 25% tax bracket at the moment, my brother is one bracket lower.  I don't know the fair value of the land when our mother transferred it to us..so not sure where to begin.  It's old mining property and we sold it for $1200/acre.

Any suggestions?  Thanks in advance.

Hi,

Glad you made it here, and welcome to the forum. Here is some information you might find useful. First some general information about capital gain tax, you probably already know most of this, but just in case, then some more details.

Tax Facts About Capital Gains and Losses
IRS TAX TIP 2009-35

• Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.
• When you sell a capital asset, the difference between the amount you sell it for and your basis, which is usually what you paid for it, is a capital gain or a capital loss.
• You must report all capital gains.
• You may deduct capital losses only on investment property, not on property held for personal use.
• Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.
• Net capital gain is the amount by which your net long-term capital gain is more than your net short-term capital loss.
• The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income and are called the maximum capital gains rates. For 2008, the maximum capital gains rates are 0%, 15%, 25% or 28%.
• If your capital losses exceed your capital gains, the excess can be deducted on your tax return, up to an annual limit of $3,000 ($1,500 if you are married filing separately).
• If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year.
• Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040.
  For more information about reporting capital gains and losses, get Publication 17, Your Federal Income Tax, and Publication 550, Investment Income and Expenses, available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Information about how to tax property sale can be found in the following publications:

Publication 17, Your Federal Income Tax
 (http://www.irs.gov/pub/irs-pdf/p17.pdf)
Publication 550, Investment Income and Expenses
 (http://www.irs.gov/pub/irs-pdf/p550.pdf)
Schedule D
 (http://www.irs.gov/pub/irs-pdf/i1040sd.pdf)

Pay attention to Publication 17. Chapter 13 Basis of Property talks on page 93 about Fair market value and says "FMV is the price at which the property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the necessary facts. Sales of similar property on or about the same date may be helpful in figuring the FMV of the property.". Take a look at pages 93-110.

I understand your biggest concern is to figure out the FMV. See Publication 561 Determining the Value of Donated Property (http://www.irs.gov/pub/irs-pdf/p561.pdf). There is a section on Real Estate (http://www.irs.gov/publications/p561/ar02.html#d0e1059) which suggests a detailed appraisal by a professional appraiser. Your issue being of historical nature is quite complicated. Getting an appraisal from a professional appraiser will cost you something, but it will also protect you from potential IRS scrutiny (IRS might object to your appraisal if you do it yourself, but they should be ok if they see a professional appraisal).

nice, by the way, here are two pages about capital gains tax from this web site

Long term & short term capital gain and loss (http://www.maxi-pedia.com/long+term+short+term+capital+gain+and+loss)

Capital gains tax rates (http://www.maxi-pedia.com/capital+gains+tax+rates) (IRS fedaral taxes)

A capital gains tax is a type of tax levied on capital gains incurred by individuals and corporations. Capital gains are the profits that an investor realizes. Any profits or gains arising from the transfer of a capital asset effected in the previous year.