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Tax ramifications on Sale

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CLJM

Member
What is the name of your state? Washington
My Mother is a resident in Washington State and has property(land) in Pennsylvania owned with her 4 siblings. My Question is : I would like to know what the tax ramifications would be for her if they were to sell the property in Pennsylvania. Lets say the property sells for 10 million----that would be 2 million per owner. What are the tax issues for that sale in regards to state law for Washington where she resides and Pennsylvania where the property is owned ?
Will she face a double tax issue for both states ?....her resident state ?....and the property state ? Thank you so kindly.
 


LdiJ

Senior Member
What is the name of your state? Washington
My Mother is a resident in Washington State and has property(land) in Pennsylvania owned with her 4 siblings. My Question is : I would like to know what the tax ramifications would be for her if they were to sell the property in Pennsylvania. Lets say the property sells for 10 million----that would be 2 million per owner. What are the tax issues for that sale in regards to state law for Washington where she resides and Pennsylvania where the property is owned ?
Will she face a double tax issue for both states ?....her resident state ?....and the property state ? Thank you so kindly.
On a federal level there will be capital gains tax on the gain. For information on the state level you really need to consult a professional in both states. Generally there is not double taxation...each state has provisions to credit for taxes paid to other states, but you are going to need to speak to people familiar with the individual state laws. I don't know if any of the other regulars are familiar with either of those states.
 

CLJM

Member
Thank you LdiJ for your prompt response. I am asking for informational purposes so that I am able to intelligently talk with and help my Mother with some decisions she is contemplating as she prepares to finalize her estate. If I have an understanding of the "basics"....it will allow me to better help her before she makes final decisions with her Attorney. Would the capital gains tax be paid for the state of Pennsylvania or Washington ? --- I am asking because quite possibly then, other taxes would be due based on that capital gains. Washington State has no income tax...whereas, Pennsylvania does
Yes, perhapsa "regular" more familiar with PA and WA will know the rate or percentage of the capital gains tax ( 15 % on the 2 million net ? ) and any other taxes that would be due.
Thank you again...this us a wonderful forum to help people !
 

anteater

Senior Member
In some ways, PA Income Tax is simplicity itself. You pay 3.07%. No tax brackets. No special rates.

A non-resident pays PA tax on income realized from PA sources. A gain on disposition of real property located in PA is one of those sources.

You only mentioned the potential selling price. The taxable gain is the difference between the net sales proceeds and adjusted cost basis. Do you have any idea what the cost basis of the property is?
 

CLJM

Member
Thank you for your response Anteater. According to the deed passed from grantor to grantee ( 5 siblings) in 1997, the "consideration" was $20,000.00.

**EDIT FOR CORECTION ** Wrong date....should be 1977 instead of 1997. Thank you.
 
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LdiJ

Senior Member
Thank you for your response Anteater. According to the deed passed from grantor to grantee ( 5 siblings) in 1997, the "consideration" was $20,000.00.

**EDIT FOR CORECTION ** Wrong date....should be 1977 instead of 1997. Thank you.
Then there is going to be some major capital gains, and unfortunately there is really no way to avoid that. It sounds like she will owe capital gains for PA, but you still don't have an answer for WA. State tax law varies signficantly.
 

anteater

Senior Member
Then there is going to be some major capital gains, and unfortunately there is really no way to avoid that. It sounds like she will owe capital gains for PA, but you still don't have an answer for WA. State tax law varies signficantly.

WA is one of those few states that does not have a persnal income tax.

Thank you for your response Anteater. According to the deed passed from grantor to grantee ( 5 siblings) in 1997, the "consideration" was $20,000.00.
Yikes... $20K to $10M in roughly 30 years? Just eyeballing it, that is north of a 50% compounded annual appreciation rate. I think that I would do some digging into the transaction that transferred ownership to Mom and her siblings. Was it a fair market value transaction? Were there elements of a gift?
 

CLJM

Member
Anteater---- I appreciate your effort of help.

I understand the transaction that came into being back in 1977 that the Grantors were my Grandparents ( parents of the 5 siblings). ( The copy of the deed that I have stipulates the grantees,grantors and the consideration. ) This land was passed onto my Grandfather by his Grandfather, then passed on to the 5 siblings. Presumably the the "consideration" of $20,000.00 was done to establish a cost basis on the land as well as a basis for property taxes ...at the time, the area was economically detressed but, thru the past 30 years the area has seen industrial, commercial and residential growth that certainly made the property much more valuable.
So...am I undertanding the tax ramifications correctly.... ?
Lets say her share of the sale is 10 million.
Federal capital gains on her 10 million, less her 4,000. cost basis share ? at 15 % ?
PA income tax : 3.07 % on that 10 mil less the 4,000. ?
No WA income tax.
Is this correct ?...or is there more tax due ?
 
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CLJM

Member
So**************..am I correct in my assessment of the taxes that will be due ?

Lets say her share of the sale is 10 million.

Federal capital gains on her 10 million, less her 4,000. cost basis share ? at 15 % ?
PA income tax : 3.07 % on that 10 mil less the 4,000. ?
No WA income tax.
Is this correct ?...or are there other taxes due for : Federal ? PA ? and WA ?

Thank you
 

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