The land is just over 2 acres. When it was left to us in a will by my grandmother, it was valued at around $750 per acre. Now it is valued at about $16,000 per acre. What would the capital gains on that be?
So, the basis is around $1500, the FMV now is around $32,000, which means your gains are around $30,000. The tax you pay will depend on how long you've held the land -- if more than a year, you'll pay around 15%, or about $4500 in captial gains taxes (plus any state taxes your state may tack on). If you've held the land for less than a year, then it will be taxed as ordinary income, and that rate will be whateverr your ordingary income rate is. You could sell it at less than FMV, in which case you will pay correspondingly less taxes -- but you'll get less money as well!
Any suggestions on how we could handle this and pay the least amount of taxes possible?
Probably the long-term captital gais rate (if you've held the property for more than a year) is the cheapest legal way. If you haven't held the land in your name for a year yet, waiting until you have will get you into the long-term captital gains rate (15% federal plus any state taxes). However, there might be som particulars of your situation that is not clear from your posts that could change the results -- you could consult a CPA or tax attorney to see if there is another way to reduce your tax load even further. There might be some creative ways to mortgage the land or otherwise encumber the land prior to transfer that might make it possible to reduce taxes
I know this sounds crazy, but someone suggested that I gift the land to my sisters and let them pay my mounting bills. They would not be "gifting" me per se, they would just be helping pay my bills. This still sounds kind of shady to me and I just want to do what is right.
That's no more legal than the "gift" situation discussed earlier. If you are willing to do something illegal, then you can probably not pay any taxes -- then it's just a matter of how uch risk you are willing to accept. If you want to do things legally, then you'll probably get stuck with long-term captial gains.
