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A long term capital gain is when the asset that was sold was held for at least 12 months. FIL passed away in 2011. Part of DH's inheritance is a parcel of property (acreage) in Texas. This property was co-owned with DH's uncle who passed in 2016. DH and his siblings inherited 50% and are considering selling it in 2018. The property was not partitioned with his cousins until after uncle's death (finalized in 2017). Technically speaking DH (and siblings) inherited in 2011 but paperwork putting asset in their names was not completed until 2017. So (DH does need to talk to a tax professional of course) does that mean as long as DH can show FIL's trust and date of death that a sale can be considered a long term capital gain? Or will they need to wait until 12 months after the recording date?
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Too complex to answer. Upon the FIL's death, the land should have a step up basis established for capital gains purposes. If it was sold the same day he died, there would be no tax due. If it has appreciated in value since that day, then taxes would be due based on the step up basis. But you had a second event in 2017 that may affect the step up basis. And the co-ownership makes it even more complicated. And if it is farmland, it can be even more complex.
Visit a tax attorney and a good one at that. -
Thank you so much for the input. DH will definitely consult with a tax attoorney on this issue. He just reminded me that he and his siblings did indeed have their names put on the deed as undivided interest upon FIL's death in 2011. The acreage in this case is considered to be woodlands. DH and siblings also inherited 1/2 of a family farm as well. They plan to hang on to that property. It is currently rented to a cattle rancher so taxes are low. DH would love to move to Texas (we are currently in CA) but the weather sounds brutal in the summer..................Comment
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