Posted on : 02-06-2010 | By : admin | In : Property
Many people find themselves in a situation in which they have inherited property from a friend or relative who has passed away. Inheriting property can provide a significant financial gain to the recipient, however, if the property is unwanted it will need to be sold before any profit is realised.
In order to sell the property on the open market the beneficiary of the inheritance will usually give the keys to an estate agent who is local to the property with instructions to sell it as quickly as possible. The estate agent will offer the property for sale on the open market in the usual way, but there can be issues the beneficiary should consider.
Firstly, inherited property can often be in left in a poor state of repair. This can make the property difficult to sell through an estate agent. The inherited property will be competing with other properties the estate agent has on their books, most of which will be in a better state of repair. This could result in the inherited property languishing on the market for a long time and the final selling price being significantly lower than the original asking price.
Additionally, the estate agent will charge a fee to the beneficiary once the property is sold. Also, while the property is on the market, the vendor may incur costs such as council rates and utilities. The property may also require some refurbishment and redecorating. All of these expenses must be met by the person who inherited the property.
A final issue to consider is that the property may not be located anywhere near the beneficiary. This could result in several long distance trips by the seller to visit the property and the estate agent while it is on the market. This may particularly be the case for properties that require repairs and maintenance to be carried out before it can be sold.
All of the time and cost spent on dealing with these issues could take a sizable chunk out of the beneficiary’s inheritance once the property is sold. A better option could therefore be to sell the property privately at a discount as soon as the property comes into the beneficiary’s possession.
While this would mean immediately surrendering some of the inheritance due but it could save time and money in the long run.
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What if after the sale of personal property, the buyers never chg the title or assessment to their name?What should you do if the personal property tax office for a state you no longer reside in is seeking you for payment on personal property for real estate that was sold several years ago? Is there a statute of limitations on the sale of real estate? If the proper papers were never recorded, does this mean the property is still owned by the original owners? Can the property be taken back by the seller, if all owed back taxes were paid up? Where can I get information on this?
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For starters, you never said how long you have owned the property. Also, you never said whether you are currently living in the property.
If you have only owned it a short time regardless of where you live, there won't be much difference because your "basis" in the property was adjusted to fair market value at the time you received the inherited property. If you have owned the property for more than two years, and this has been your primary residence for 2 of the last 5 years, then you have up to $250,000 each (assuming you file single) of gain that can be excluded under Sec 121. If you have owned it more than 1 year and this is not your primary residence, then you will capital gains tax (15%) but this depends on which tax bracket you are in.
No, you wouldn't have to pay any tax on the inheritance. If you sell it, there might be a capital gains tax, but only on any appreciation between the time you inherited the property and the time you sold it.
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You must report the sale on schedule D (Form 1040). You will claim credit for taxes paid in the foreign country. Read about foreign tax credit http://taxipay.blogspot.com/2008/03/us-citizen-or-resident-with-foreign.html
Your basis of the property is the fair market value of the property on the date of death of the person from whom you inherited the property.
Read about inheritance http://taxipay.blogspot.com/2008/02/tax-on-inheritances.html
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You'll have to pay tax on the capital gain for the property. You need to figure out your adjusted basis in the property and subtract that from the selling price. And the difference is the capital gain (or loss).
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It depends on how you are listed on the title of these properties. A property lawyer would know more.
Fortunately for you Florida doesn't have an income tax.
Your basis in the property isn't what your dad paid for it–since you got the property at his death, you need to know what it was worth on the date of death.
Yes, you can get an "historical" appraisal. (If there was an estate return filed with the IRS or the state of MA, use the figures that were on those forms.)
So, if it was worth $30K when he died and you sell it for $40K, you'll have a long term gain of $10K. The highest rate for LTCG right now is 15%.
Yes, one sibling can file a suit for partition of the property and force the sale. Any of the property owners can bring a suit for partition. However that may not be the smartest thing to do. In most of these family disputes, the only ones who come out ahead are the lawyers. Attorney fees can eat up the entire value of the inheritance. See if everyone will sit down with a mediator or even the Pastor of the Church. Someone who is a "non interested party" that can help the siblings come to an agreement.
Make certain that only the siblings are present at the meeting, do not allow spouses or children to attend. Especially if there is any history of "in-law problems". It is hard enough to get 8 people to agree but 16 or more can be downright impossible.
Hello there,
Computing the gain on the sale: The gain on the sale will be the excess of the net selling price (sales prices less expenses of the sale) over the basis of the property. The basis of the property will be the value of the property as listed in the estate (generally fair market value at the date of the decedent's death) plus the portion of estate tax attributable to the property.
The tax rate for gains: Most likely the tax rate will be 15%.
Reinvesting: If you sell the property and later decide to invest smoe or all of the funds in other property. You will pay tax on the gain without regard to what you do with the proceeds from the sale.
There are provisions in the tax law where you may reinvest without having to recognize the gain on the dispositon of the property (ie not pay tax at this time).Internal Revenue Code Secton 1031 provides one such example. This is commonly called a 1031 exchange, a like kind exchange or a deferred tax exchange. From the facts you presented, it sounds as if the house is not your personal residence. It is held in trust and is most likely an investment property of the trust. In order to take advantage of such, you would need to trade the property or other similar investment property. If this would happen before the trust distributes your share to you, the trustee would have to do the trade. If this would happen after you get your share, but while your brother's share is still in the trust, you and the trustee would jointly have to do the trade.
The trade would not have to be a direct swap between two parties. There can be more involved in the deal. Perhaps 3, You trade your house and receive a house from Party B. Party B receives cash from Party C. Party C gets your house. (Hope you follow that).
Also the trades do not need to be do at the same time (simultaneously). The deal can be a deferred trade. However there are strict restrictions about actually receiving cash during the trades. You should seek tax advice on how to handle a non-simultaneous exchange.
One important word of caution regarding exchanges of property. If you plan to walk out of the deal with any cash, you will be taxed. You will have to recognize gain (ie pay tax) in the amount of cash received up to the extent of the gain. The first dollors out of the deal will be gain.
Hope this answers your question.
Good luck
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