Want to sell land, can we adjust basis?

[coolmarden]

What is the name of your state? We live in California, but the land is located in Montana.

My parents own a piece of property in Montana. It's basis is about $30k and is potentially worth $600k. Is there a way to increase its basis in order to reduce the amount of capital gains for my parents? I've read about a marital deduction but i'm not sure exactly how it works and if it'd work in this sitution. Thanks for any help you can offer.

Marden

 

[seniorjudge]

http://www.irs.gov/faqs/faq10.html
http://www.irs.gov/faqs/faq10-1.html
http://www.irs.gov/publications/p17/pt03.html

I do NOT know the answer to your question.

Here are some IRS publications which may contain the answer.

I hope no one tells you that you are in the wrong forum because I would like to know the answer to this myself.

 

[divgradcurl]

Which "marital deduction" are you referring to? Generally, a married couple can deduct up to $500,000 ($250,000 each, may be a bit higher now) from the sale of property, as long as the property was their primary residence for at least 2 of the last 5 years. If the property was not their primary residence for 2 of the last 5 years, there are no deductions, and the entire gain on the property is subject to capital gains.

There are really only two ways to increase the basis: you parents could die and will the property away, in which case the heirs would receive a stepped-up basis (stepped-up to the FMV at time of death), but that's probably not what you are looking for. The basis can also be increased by improving the property -- improvements will increase the basis dollar-for-dollar.

However, there are no "freebie" ways to increase the basis. The parents are going to have to either hold on to the land, or take the capital gains hit.

BTW, you are in the wrong forum -- the tax forum is the place to be, and abezon or snipes5 can give you the most correct answer you can hope for...

 

[seniorjudge]

"BTW, you are in the wrong forum -- the tax forum is the place to be, and abezon or snipes5 can give you the most correct answer you can hope for..."

Coolmarden, you heard the word! Thanks, divgradcurl! You helped me understand this.

 

[coolmarden]

Thanks

Thanks for both of your help. It wasn't the answer i was hoping to hear but now I know. I'm going to try posting it on the tax thread anyway and maybe the guys have some tips. Thanks again for you help!

Marden

 

[seniorjudge]

Be sure and tell 'em we sent you over....You do NOT want to get hit with the dreaded words: double-posting!

 

[HomeGuru]

or duplicate post.