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tax implications of late father's inherited property sale

Posted: Sat Aug 10, 2019 1:23 pm
by VinnyB
Hi Everyone,

I was hoping someone might be able to shed some light on an inheritance-type situation and its possible tax implications for me. In a nutshell:
There is some property that is currently in my grandparents' estate's name (my grandparents passed way 30 years ago). The plan was for my father and his two siblings to split the money evenly when the property was sold. However, the property is still for sale and my father recently passed away. In his will, he bequeathed his share of the property proceeds to me and my sister. My approximate share of the sale will probably be around $25,000.

As such, am I liable for any tax implication on these proceeds? Is there some type of cost basis I need to be aware of (either computed when my grandparents died or when my father died) regarding the fair market value of the property?

Any help would be greatly appreciated. Thanks so much for your time.

Re: tax implications of late father's inherited property sale

Posted: Sat Aug 10, 2019 3:49 pm
by Silk McCue
Sorry for your loss. The cost basis for your inheritance is based upon the value of your fathers share as of the date of his death. So the basis is stepped up to current values. You only pay taxes on any gain you receive upon the sale that are over what that share was valued at the time of his death.

Cheers

Re: tax implications of late father's inherited property sale

Posted: Sun Aug 11, 2019 11:50 pm
by VinnyB
Thank you for your condolences, and thank you for the info. I appreciate it.

Re: tax implications of late father's inherited property sale

Posted: Sun Aug 11, 2019 11:55 pm
by Watty
VinnyB wrote:
Sat Aug 10, 2019 1:23 pm
There is some property that is currently in my grandparents' estate's name (my grandparents passed way 30 years ago).
It sounds very odd that it was not put in the two siblings name unless it is in some sort of trust.

I think this would be a situation where you would need professional tax advice.

Re: tax implications of late father's inherited property sale

Posted: Mon Aug 12, 2019 3:33 am
by rossington
Why has the property not been sold for 30 years? Please elaborate.

Re: tax implications of late father's inherited property sale

Posted: Mon Aug 12, 2019 8:17 am
by retiringwhen
rossington wrote:
Mon Aug 12, 2019 3:33 am
Why has the property not been sold for 30 years? Please elaborate.
Not the OP, but stuff happens.

I know of a small parcel that was owned by a man who died in 1973 and the property is still titled in his name. Only two of his three direct descendents are still alive; one of them still pays the property tax each year.

Re: tax implications of late father's inherited property sale

Posted: Mon Aug 12, 2019 3:14 pm
by VinnyB
Thanks everyone. I wish I knew why the property hasn't sold yet - one of life's many mysteries. As I mentioned, best I can tell is that the property is in name of my grandparents' estate, with (probably) my aunt and uncle as the beneficiaries/custodians. Since I am not named on any property deed or document, and the only reference to my receiving money is in my father's will, I am now thinking that there would NOT be any tax implications. That, basically, I would just receive a check for X amount after the transaction is completed. The only people/entities that would be liable for paying tax or declaring capital gains would be the estate of my grandparents and/or my aunt and uncle, depending on how the documentation is written.

Does anyone have a take on this idea? Thanks.

Re: tax implications of late father's inherited property sale

Posted: Mon Aug 12, 2019 3:19 pm
by RickBoglehead
VinnyB wrote:
Mon Aug 12, 2019 3:14 pm
Thanks everyone. I wish I knew why the property hasn't sold yet - one of life's many mysteries. As I mentioned, best I can tell is that the property is in name of my grandparents' estate, with (probably) my aunt and uncle as the beneficiaries/custodians. Since I am not named on any property deed or document, and the only reference to my receiving money is in my father's will, I am now thinking that there would NOT be any tax implications. That, basically, I would just receive a check for X amount after the transaction is completed. The only people/entities that would be liable for paying tax or declaring capital gains would be the estate of my grandparents and/or my aunt and uncle, depending on how the documentation is written.

Does anyone have a take on this idea? Thanks.
See second post. If you get anything, it answers your tax question.

Re: tax implications of late father's inherited property sale

Posted: Mon Aug 12, 2019 3:24 pm
by LordB
While I'm sure you will get endless answers to all possibilities since bogleheads tends to beat topics to death your best bet would be to get all the info on it before hand and post once you know the actual situation. All of this depends on how it is structured etc.

Frankly I am unsure if you will be easily able to get it sold. Something delayed it from being sold all these 30 years, things aren't likely to start moving quickly just because you want them to.

Personally unless this property is can get sold quickly or is actually setup properly to make your life easy legality wise I would consider just disclaiming the inheritance to not need to deal with it as I suspect it is a mess given the lack of a sale in 30 years and i would be somewhat surprised if in the end you actually get anything (lawyers can eat money remarkably fast), but then again I'm a bit lazy and don't like dealing with things like this and $25k is not enough to be a major change in my life. YMMV.

Re: tax implications of late father's inherited property sale

Posted: Mon Aug 12, 2019 4:32 pm
by not4me
VinnyB wrote:
Mon Aug 12, 2019 3:14 pm
Thanks everyone. I wish I knew why the property hasn't sold yet - one of life's many mysteries. As I mentioned, best I can tell is that the property is in name of my grandparents' estate, with (probably) my aunt and uncle as the beneficiaries/custodians. Since I am not named on any property deed or document, and the only reference to my receiving money is in my father's will, I am now thinking that there would NOT be any tax implications. That, basically, I would just receive a check for X amount after the transaction is completed. The only people/entities that would be liable for paying tax or declaring capital gains would be the estate of my grandparents and/or my aunt and uncle, depending on how the documentation is written.

Does anyone have a take on this idea? Thanks.
1st, sorry for the loss of your father.

2nd, as part of settling his estate, I would encourage you to find out exactly what the situation is. It is correct that you would owe cap gain on anything over its value when he died, but what is that? May not be as clear as you hope.

I somewhat doubt it can be considered part of grandparents estate. Who has been paying property tax? Who would be "authorized" to negotiate on behalf on the estate?

I don't think you actually said it had been on the market since grandparents died. Usually, even for a slow market, price is the main impediment. So, who set the price? It sounds as if you think the sale would net $150k (sale price maybe $170k?) -- what is that based on?Aunt/uncle haven't gotten a step-up in basis & so may not be eager to sell & get those gains. They might at least want your father's estate to pay a portion. What happens if it isn't sold before they die? If you're in line to get the sale proceeds, you are likely in line to pay property tax...or deal with an illegal dump on the land, etc. Or better, what if something occurs to cause to value to spike up?

I hope best case turns out to be your case, but lots could go wrong. Better to know upfront rather than later

Re: tax implications of late father's inherited property sale

Posted: Mon Aug 12, 2019 7:12 pm
by VinnyB
Thanks, again, everyone. Try as I might, I think this is one of those things that falls in the 'cross that bridge when I come to it' category..

Thanks again.

Re: tax implications of late father's inherited property sale

Posted: Mon Aug 12, 2019 7:28 pm
by celia
How do you know there was even an attempt to sell the property in the last 30 years? Could it be possible that your aunt and uncle are each waiting for the other or a third party to do something? If I was in your shoes, I would call the aunt and uncle separately and ask them about the property. What do they know about it? Do they expect it to be sold someday? What is it that is holding it up? (Take notes.)

They will probably have different stories. Just listen to them. You might just be another party who assumes "someone" will eventually sell it, when there is no one in charge.

Is someone living in the house? Do they pay rent? to whom? This would be income that someone would have to report on their taxes each year.

VinnyB wrote:
Mon Aug 12, 2019 7:12 pm
Thanks, again, everyone. Try as I might, I think this is one of those things that falls in the 'cross that bridge when I come to it' category..
At a minimum, you should have the property appraised for today's market value. Your (and your sibling's) eventual gain or loss will be based on your share of today's value.

Re: tax implications of late father's inherited property sale

Posted: Mon Aug 12, 2019 7:46 pm
by Wiggums
Sorry for your loss. You got really good suggestions. Let us know what you find out.