How to pay capital gains when two parties have rights to the asset?
Before I ask my question let me say that I realize I will need the assistance of a qualified tax accountant, I am asking the question here to educate myself on the issues.
I thank you in advance for your responses!
By way of background, my sister and I own some land left to us by our father. He purchased the land in 1975. The property was retitled several years ago and the current title is a life estate to my sister, with remainder to me.
Recently, developers have come knocking on our door and we will be selling the land at a considerable profit. We have engaged the services of a well know real-estate firm and we have an attorney that is representing us in the transaction.
Once the sale is completed, we plan to split the money. My question concerns how to go about reporting our capital gains and paying the capital gains taxes? I understand that the capital gains tax rate will depend on the our tax bracket. My sister makes more money than I do and she is in a higher tax bracket. Does the fact that she owns the life estate mean that she has to report the gain? If so, when she pays me my share, how do I report that?
I would appreciate it if someone could walk me through the steps.
Any help will be appreciated!