Property transfer

[bodean]

What is the name of your state (only U.S. law)? Alabama

My mother has transferred land to us (my husband and I) after the death of my father. This is farm land that is separate from her home site that she still owns and lives on. Dad passed in Nov, 2009 and the land was transferred to us in mid 2010. The land is about 4 acres and worth around $20k to $25k.

Do we need to report this on our 2010 taxes, and if so, then what is the best way to do this? Do we need to establish and document current value in case we need to sell or transfer the property in the future? Would there be any gift tax, or inheritance taxes due on it now, or would that take effect later? We are both 56, if that matters.

 

[tranquility]

There is no tax due on the gift, nor would it need to be reported if it was given to both you AND your husband. We would need to know how title was held by mother and father to know what your basis is (as well as other facts) as it could be:
1. Mother's basis
2. Mother's basis of 1/2 plus FMV at time of father's death for other 1/2.
3. FMV at time of father's death.
4. FMV at time of gift if less than any of the above three.

 

[bodean]

Thank you for your answer. The land was titled in both parents name, with it going to surviving spouse. We were told that it could be worded either that half was inherited from the father, and half was given or transferred by the mother. Or that the entire parcel was given/transferred by the mother.
After re-reading the paper work, I just found out that the land was actually sold to us for $10.

 

[anteater]

Thank you for your answer. The land was titled in both parents name, with it going to surviving spouse. We were told that it could be worded either that half was inherited from the father, and half was given or transferred by the mother. Or that the entire parcel was given/transferred by the mother.

I would say that you want Tranquility's:

2. Mother's basis of 1/2 plus FMV at time of father's death for other 1/2, and
4. FMV at time of gift if less than any of the above three.

To figure the basis of property you receive as a gift, you must know its adjusted basis to the donor just before it was given to you, its FMV at the time it was given to you, and any gift tax paid on it.

FMV less than donor's adjusted basis. If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Your basis for figuring gain is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustments to basis while you held the property.

You can get the basics at:
http://www.irs.gov/publications/p17/ch13.html#en_US_2010_publink1000172211

After re-reading the paper work, I just found out that the land was actually sold to us for $10.

That's just convention. It was a gift.