step up basis ??

[samantha9876]

tx
I have a question on step up basis?
If my parent left me a piece of property which they purchased long ago and it has appreciated in value.
Instead of trying to find out what is the step up basis and how much tax I have to pay,would it be better to sell it while it is part of the estate and then distribute cash to me,in that way I dont have to pay any tax? on the appreciation/
My parent has a piece of land in Florida which they bought for $5k 20 years ago,and now it is worth 85k,can the trustee or the executor of the estate sell the land at 85k and distribute 85k cash to me,so I dont have to pay any tax?
Does this make any sense,I am not a tax lawyer/
Thanks in advance
Sammy

 

[anteater]

If your Mother or her revocable trust owns the property when she passes away, the basis is adjusted to the fair market value on her date of death.

It really does not make a difference if the probate estate/trust sells it or you sell it once distributed to you. The sale would be subject to tax.

The fair market value of real property is always just an estimate. If the property is sold within a reasonable period after your mother's passing - say 6 to 9 months - then it is reasonable to assume that the selling price is the fair market value and, therefore, the adjusted basis. (Unless there is evidence to suggest that real estate prices are escalating rapidly in that area.)

 

[samantha9876]

step up basis

If your Mother or her revocable trust owns the property when she passes away, the basis is adjusted to the fair market value on her date of death.

It really does not make a difference if the probate estate/trust sells it or you sell it once distributed to you. The sale would be subject to tax.

The fair market value of real property is always just an estimate. If the property is sold within a reasonable period after your mother's passing - say 6 to 9 months - then it is reasonable to assume that the selling price is the fair market value and, therefore, the adjusted basis. (Unless there is evidence to suggest that real estate prices are escalating rapidly in that area.)

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thank you for your reply.
if the estate sells it,do they pay tax then?

 

[FlyingRon]

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thank you for your reply.
if the estate sells it,do they pay tax then?

There's two taxes involved here. One is the estate (inheritance) tax, but unless we're talking multimillion dollar estates, you probably don't have to worry about that.
There there's capital gain (which is what the stepped up basis is all about). It makes no difference if you inherit it or the estate sells it, if there is a gain between the value at the time of the basis step up (the day your parent died) and what it sold for (less any improvements or sales expenses), there is a taxable capital gain. As pointed out, if you sell it or the estate sells it a short time after the death of the owner, you can probably assume it hasn't appreciated enough to make a difference.

 

[samantha9876]

There's two taxes involved here. One is the estate (inheritance) tax, but unless we're talking multimillion dollar estates, you probably don't have to worry about that.
There there's capital gain (which is what the stepped up basis is all about). It makes no difference if you inherit it or the estate sells it, if there is a gain between the value at the time of the basis step up (the day your parent died) and what it sold for (less any improvements or sales expenses), there is a taxable capital gain. As pointed out, if you sell it or the estate sells it a short time after the death of the owner, you can probably assume it hasn't appreciated enough to make a difference.

but my question is-who pays the tax?
if estate sells it and give me cash,do they pay tax then?
if estate pays tax,then I dont report the tax payment on my 104o return?

 

[FlyingRon]

but my question is-who pays the tax?
if estate sells it and give me cash,do they pay tax then?
if estate pays tax,then I dont report the tax payment on my 104o return?

Who pays the tax is the person who sells it. If the estate has a taxable gain, they have their own return to file.
If you have it, yes it goes on your 1040 Sched E.

The amount of net proceeds is pretty much the same either way. Presumably the deceased owned this propery long enough that it qualifies for the Long Term Gain treatment.

 

[davew128]

Who pays the tax is the person who sells it. If the estate has a taxable gain, they have their own return to file.
If you have it, yes it goes on your 1040 Sched E.

Any gain distributed to a beneficiary (which is possible in a couple of different ways) on a K-1 still goes on Sch D. If sold shortly after death, I would generally expect a capital loss based on selling expenses.

The amount of net proceeds is pretty much the same either way. Presumably the deceased owned this propery long enough that it qualifies for the Long Term Gain treatment.

Doesn't matter. It's inherited property which means it is by definition long term gain property even if sold a day after the deceased died.