Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 07-17-2018, 05:41 PM
Junior Member
 
Join Date: Jul 2018
Posts: 3
An ultimate Capital Gains question thru Intestate agreement

Original deed is in name of parents who are both deceased. Male passed May of 97' Female passed Oct 97'...had three siblings: son passed Aug 89' youngest daughter passed Apr 2011...eldest daughter would be sole distributee decendent thru NYS succession law...Eldest daughter resides in PA and has agreed to a one third partnership with common law husband of youngest sister He is the primary residence since 2011 with a tenant occupant..Another third agreed to to her nephew, the only son of her sister who is the voluntary administrator of things of lesser value on the property and whose name appears on home insurance, property taxes, water sewer, etc....So the question becomes , if deed were ultimately placed in my name and we used the FMV at the time of death of youngest sister (396K), along with 50K of sweat equity placed in the property by primary resident since 2011, how would this 33 and 1/3 factor into Capital Gains on the one third partner and would the other two partners be subject to any severe taxes on money gained from a future sale. THANKS for your TIME and ATTENTION



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 07-18-2018, 02:23 AM
Moderator
 
Join Date: Oct 2010
Posts: 5,139
When you sell your portion of the property you?ve inherited, your tax basis for the property is the home?s value on the day the person who willed it to you died. The difference between that value and the amount you realize from the sale is the gain on which you owe taxes. Since several siblings inherit equal shares in the property, youneed to divide the capital gain equally and each claim that share on their taxes. So, if the home was worth $300k when Mom died and you sell for $345k and three siblings inherit, each claims a $15k gain. If you sell for the value of the home or less, you don?t have a gain to report; long-term capital gains are taxed at one of three potential rates and all are much lower than the corresponding marginal tax rates. A 0% long-term capital gains tax rate applies to individuals in the two lowest (10% and 15%) marginal tax brackets. A 15% long-term capital gains tax rate applies to the next four brackets , 25%, 28%, 33%, and 35%. Finally, a 20% long-term capital gains tax rate applies to taxpayers in the highest (39.6%) tax bracket.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #3 (permalink)  
Old 07-18-2018, 09:28 AM
Junior Member
 
Join Date: Jul 2018
Posts: 3
Thank u for your immediate response.....i understand your answer completely but in taking the scenario a step further, lets say 396k was FMV at time of mothers death, and lets further say sale would be for 1.1 mil, and lets ask if their is a primary resident exclusion that can be put in play and can 50K of sweat equity be a factor...OR, is the 700K difference subject completely to capital gains even though their is a three division (375K each) or can the primary resident take the hit exclusively for capital gains ? OR put another way if assumed sale price is $1.1m and at time of death of mother there is a three way agreement on property meaning 375K each, and FMV was 396K at time of death thereby meaning 135K amongst three parties, could there me an assumed capital gain by primary resident of 375K minus 135K minus 50K (sweat equity) for the primary resident (with a 2/3 exclusion...the other 1/3 is rented), thereby subjecting only the 210K times 1/3 to Capital Gains tax of 15% and NYC/NYS 10% .............may be a little far fetched, but hope the numbers make logical sense, kindly let me know AND is the 375K of the other two parties subject to inheritance tax or gift tax or capital gains tax or what have u tax... AGAIN THANK YOU for your TIME and ATTENTION



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #4 (permalink)  
Old 07-19-2018, 05:11 AM
Moderator
 
Join Date: Oct 2010
Posts: 5,139
Quote:
Originally Posted by cyber0617 View Post
Thank u for your immediate response.....i understand your answer completely but in taking the scenario a step further, lets say 396k was FMV at time of mothers death, and lets further say sale would be for 1.1 mil, and lets ask if their is a primary resident exclusion that can be put in play and can 50K of sweat equity be a factor...OR, is the 700K difference subject completely to capital gains even though their is a three division (375K each) or can the primary resident take the hit exclusively for capital gains ? OR put another way if assumed sale price is $1.1m and at time of death of mother there is a three way agreement on property meaning 375K each, and FMV was 396K at time of death thereby meaning 135K amongst three parties, could there me an assumed capital gain by primary resident of 375K minus 135K minus 50K (sweat equity) for the primary resident (with a 2/3 exclusion...the other 1/3 is rented), thereby subjecting only the 210K times 1/3 to Capital Gains tax of 15% and NYC/NYS 10% .............may be a little far fetched, but hope the numbers make logical sense, kindly let me know AND is the 375K of the other two parties subject to inheritance tax or gift tax or capital gains tax or what have u tax... AGAIN THANK YOU for your TIME and ATTENTION
Thank u for your immediate response.....i understand your answer completely but in taking the scenario a step further, lets say 396k was FMV at time of mothers death, and lets further say sale would be for 1.1 mil, and lets ask if their is a primary resident exclusion that can be put in play and can 50K of sweat equity be a factor...OR, is the 700K difference subject completely to capital gains even though their is a three division (375K each) or can the primary resident take the hit exclusively for capital gains ?==========>then you may exclude the The $250k/$500k Home Sale Tax Exclusion from your portion of the total LTCG on the sale of the primary residence aslongas it is your primary residenceand you qualify for the exclusion. To qualify for the $250k/$500k home sale exclusion, you must own and occupy the home as your principal residence for at least 2 years before you sell it.


OR put another way if assumed sale price is $1.1m and at time of death of mother there is a three way agreement on property meaning 375K each, and FMV was 396K at time of death thereby meaning 135K amongst three parties, could there me an assumed capital gain by primary resident of 375K minus 135K minus 50K (sweat equity) for the primary resident=======>>you do not subtract so called sweat equity in calculating net amount of long term capital gain unless you hire contractors to do part or all of the repairs and improvements. The value of your time is not deductible nor can you add it to basis. Materials used in an improvement, yes. your labor, no. When you sell your home, your gain / loss for tax purposes is determined by subtracting its basis on the date of sale from the sales price .The larger your basis, the smaller your profit will be, reducing your tax liability asyou can see, You cannot use cost as the starting basis for a home that you received as an inheritance. The basis of property you inherit is usually the property?s fair market value at the time your mother passed away.in your case your protion of LTCG id its selling price minus its adjusted basis divided by three. You may increase the basis of the property by the cost of any additions or improvements as said. The most common way you increase your basis is to make home improvements. Improvements include any work done that adds to the value of your home, increases its useful life, or adapts it to new uses.



(with a 2/3 exclusion...the other 1/3 is rented), =========>>once the pty was used as a rental, then you need to recapture the unrecaptured sec1245 pty; A gain on the disposition of section 1245 property is treated as ordinary income to the extent of depreciation allowed or allowable. And the sec 1245 recapture reduces excludible LTCG by that amount; imean your LTCG that is excludible under sec 121 is $500K and the amount of se 1245 recapture is $200K then you need to pay tax on$200K as ordinary income at ordianry rate of 20% aslongas your tax bracket is higher than 15% and hen you may exclude only the remaining $300K.

thereby subjecting only the 210K times 1/3 to Capital Gains tax of 15% and NYC/NYS 10% .............may be a little far fetched, but hope the numbers make logical sense, kindly let me know AND is the 375K of the other two parties subject to inheritance tax or gift tax or capital gains tax or what have u tax====>it depends; the recipients are not subject to inheritance/gift taxes at all unless your estates valued at more than $4,187,500. This means that even if your mother?s estate doesn?t owe federal gift and estate taxes because it is not valued above the lifetime exemption amount of $5.45 million, it could owe New York estate taxes if it is valued above the $4,187,500 threshold.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #5 (permalink)  
Old 07-20-2018, 11:16 AM
Junior Member
 
Join Date: Jul 2018
Posts: 3
Thank u very much, understood your numbers and the explanations thereof completely and absolutely Just gotta do a little research on the Sec 1245 recapture but all else was spot on THANKS AGAIN for your TIME and ATTENTION



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Capital Gains Question trev2421 Capital Gains 1 03-12-2018 03:00 AM
Capital gains question tnbass435 For 2016 0 02-17-2018 01:47 PM
Short Sale - Capital Gains Question OverTaxed1 Rental Real-Estate 1 05-07-2015 01:08 PM
Another short term capital gains question asdbnm For 2014 1 01-12-2015 05:04 PM
Capital gains question Neens27 Itemized Deductions 1 11-18-2013 11:34 PM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning