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Old 02-03-2012, 12:56 PM
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sale of inherited property

I inherited a small property, with years of back taxes due, old unlivable mobile home, septic maint due on it. Sept 2011 I sold it. I am totally confused how to show it on my taxes as I have read up on the new required forms. Can I deduct all the back taxes that I paid and all of the work done to sale it? I need to now what forms to use for selling this small property with very little gain after all has beenspent. thanks



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Old 02-04-2012, 12:00 AM
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“Can I deduct all the back taxes that I paid and all of the work done to sale it?”---->Sorry No; the federal tax you pay isn't deductible from your income to then calculate the tax you pay . You determine your income before Fed tax and pay your tax based on that income. However, State income taxes(r/e taxes) are deductible from Federal income on SCh a of 1040. If you do NOT itemize your deductions on Sch A, then you can’t deduct the taxes.so if you pay back state income taxes, you probably can get a refund of the Federal tax you paid on that deductible amount. Again, obviously State income tax isn't deductible in calculating the amount of State income you have to pay tax on. It makes no difference if you pay the tax on time or late.it isn't deductible from itself. Penalties are AlSO never deductible.it's contrary to public policy that someone should get a benefit from their wrong doing. Again doesn't matter if the penalty is for late filing, or for dealing drugs, or whatever.
“ I need to now what forms to use for selling this small property with very little gain after all has beenspent.”----->You do NOT need to file any form for the inherited pty; for 2011, the federal estate tax exemption will be $5 million and the estate tax rate for estates valued over this amount will be 35%., so long as the estate was less than this amount no estate tax return would technically be due. If the estate exceeds this amount an estate tax return would be due. The executor or the administrator of the estate has the responsibility of filing the deceased's final tax return. If an administrator or executor of the estate was not named, then a survivor must file a tax return for the deceased. I guess you are not even subject to your state inheritance tax , in general, the amount of estate I less than $1 million. The amount varies from state to state, so you need to research the inheritance tax laws at your state government website.



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Old 02-04-2012, 10:08 AM
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Join Date: Feb 2012
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sale of inherited property

the taxes I wrote about is local property taxes.. You are saying I dont have to show the sale of the property at all on my taxes? What about the 1099-s from from the sale? And I cant deduct the property taxes from the sale price and other expenses to prepare to sell this worn property and get some of my money back out?

I am even more confused. I know I have to show the sale on this property, how do I do that? lets say I sold the property for $15,000, how do I show it? the IRS wants their cut, but I want to be able to take off my rightful expenses from the sale before the taxes.

thanks



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Old 02-04-2012, 01:40 PM
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“the taxes I wrote about is local property taxes.. You are saying I dont have to show the sale of the property at all on my taxes?”------>Sorry my bad. You will need to consider the tax consequences. As you received property as an inheritance, you may assume the government expects a share.Stepped-up value(UNLESS you inherited it in 2010, I guess), or the value of the inherited property at the time when the previous owner died, allows for less taxable gain when the inherited property is sold. Any appreciation in the value of the property during the decedent’s lifetime is forgiven. You are taxed only on appreciation after inheriting the asset. If the property has declined in value since you inherited it, you may be able to claim a loss deduction on your taxes.
“What about the 1099-s from from the sale? “---->As you can see, capital gain or loss can be classified as either long or short term. However,an inherited property is considered a long-term asset regardless of how long it was actually held. So your gain on the sale of the pty. is LTCG/LTCL. Then you would pay capital gains tax on the difference between the value of the inherited property the day you inherited and the value of the property on the day you sold it.
“And I cant deduct the property taxes from the sale price and other expenses to prepare to sell this worn property and get some of my money back out? “----->It depends;aslong as you itemize your dedcutions on Sch A of 1040 , then you can report it on Sch A line 6. If you do NOT itemize your deductions on Sch A ( but take tour std ded on your 2011 return), then you can’t deduct the pty taxes.
“I am even more confused. I know I have to show the sale on this property, how do I do that? lets say I sold the property for $15,000, how do I show it?”----->Correct; you do have report the sale on Schedule D of 1040. You need to file Form 8949 and report the amount on Form8949 line 4 on Sch D line 12 and report it on line 16 and you need to complete the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Form 1040 line 44 and report it on 1040(you can follow the instructions on the w/s o).
Please visit the IRS websites here:
http://www.irs.gov/pub/irs-pdf/f8949.pdf
http://www.irs.gov/pub/irs-pdf/f1040sd.pdf
If you are preparing the Schedule D , your date of purchase is the date of the person(from whom youinherited the pty) death. If a Form 1099-S was filed (check with the title company who handled the transfer of the deed), make sure the sales proceed on your Schedule D matches what was reported to the IRS. You can determine what the FMV was at the time of the settled estate though comparative r/e value method( by an appraisal). The IRS wants their cut, but I want to be able to take off my rightful expenses from the sale before the taxes.



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