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What do I need to pay in taxes after property sale?

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JKlowski

Junior Member
Hi, I am in Michigan,

I am about to close on some property that I inherited from my father. My probate lawyer didn't do a title search before the property went into my name and it turns out there were several judgement leins against it from a previous lawyer. I found a buyer and when the title company did a title search these leins came up. I worked out deals with the leinholders to be paid off at the closing. The sale amount is $30,000. After the liens title company and back property taxes are paid I'll be getting about $7000 to $8000. My question is this...

Am I paying income to the IRS for $7000 or $30000?

Also when do I need to pay these?

Mind you, those original liens didn't belong to me they cam with the property.

Thanks for any help.
 


LdiJ

Senior Member
Hi, I am in Michigan,

I am about to close on some property that I inherited from my father. My probate lawyer didn't do a title search before the property went into my name and it turns out there were several judgement leins against it from a previous lawyer. I found a buyer and when the title company did a title search these leins came up. I worked out deals with the leinholders to be paid off at the closing. The sale amount is $30,000. After the liens title company and back property taxes are paid I'll be getting about $7000 to $8000. My question is this...

Am I paying income to the IRS for $7000 or $30000?

Also when do I need to pay these?

Mind you, those original liens didn't belong to me they cam with the property.

Thanks for any help.
Neither figure is correct. You will pay long term capital gains tax on any gain.

Sales price minus selling costs, minus your basis is your gain. Your basis is fair market value as of the date of your father's death.

So, if the property was worth 29,000 when you inherited it, and you sold it for 30,000 and you had 1,000 in selling costs your gain is zero and you pay zero tax.
 
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JKlowski

Junior Member
So if the property has dropped in value then I'll owe no tax!?! :)

Wow, I thought the money I received from the sale would be looked at as "income".
 

JKlowski

Junior Member
Also this was not his residence. Just an empty lot. Does that make a difference?

Sorry for themultiple questions in this thread....

Thanks for any help:)
 

LdiJ

Senior Member
Yes, if the property has dropped in value you will owe no tax. You will still however have to properly report the sale. Otherwise the IRS could think you owe tax on it, when you do not.

I really wouldn't recommend using TurboTax next year, I would recommend using a professional. Its not that much more expensive than TurboTax if you use a local tax company rather than one of the big national firms. Even the most "savy" people have a year now and then when they really should use a professional.

Its immaterial what the property was...you still get the stepped up basis. It could have been a coin collection rather than real estate, and it would make no difference.
 

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