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Land Tax question?

How should my Dad leave us the proceeds from the sale of his land?

  • My Dad owns about 20 acres of land in a small town that he wishes to give to my brother, my sister, and myself now, not when he passes. My siblings and I plan to split the proceeds of the sale of the land evenly amongst us. Which way, tax-wise, would maximize the amount of money we receive from the land in the end? Should my dad give the title/deed to us first and we sell it, or Dad sells it and then gives us the money from the sale of the land? My Dad owns about 20 acres of land (there are no buildings on this land, as far as I know it’s basically woods) in a small town that he wishes to give to my brother, my sister, and myself now, not when he passes. My siblings and I plan to split the proceeds of the sale of the land evenly amongst us. Initially we had talked about having my dad transfer the land to us and then we sell it. Later my brother comes up with the idea that my dad should sell it and then give us the money. My brother thinks it would be easier to deal with it that way because in his words, “He (Dad) has to do some kind of deed of trust legal stuff to leave us the land, and then we’d still be tasked with selling it later.” I am wanting to do whatever is smartest, which may or may not be the easiest route. My question is: which way, tax-wise, would maximize the amount of money we receive from the land in the end? Should my dad give the title/deed to us first and we sell it, or Dad sells it and then gives us the money from the sale of the land? I am referring mostly to the question of which methods affect a certain amount of taxes that will need to be paid, such as property gains tax, gifted property, cost basis, and just general taxes and situations I don’t know about, or if either method yields negligible results and we should do what is "easiest". Any insight into what to do would be appreciated. We are trying to get this process done fairly quickly, although I know it can take a while before anyone may even purchase the land.

  • Answer:

    My question is: which way, tax-wise, would maximize the amount of money we receive from the land in the end? By consulting with an estates and gifts attorney. I'm sorry, but this is really not a case where you can tell your family "some people on the Internet said this way was best." Your question is about the tax consequences of certain actions and for that you need http://ask.metafilter.com/269133/How-can-I-collect-real-estate-payments-due-from-my-ex-wife#3907627.

Gmbee at Ask.Metafilter.Com Visit the source

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You need an estates/tax attorney to help you maximize the gift. It's highly dependent on what the property is worth as well. Lawyer, lawyer, lawyer.

Ruthless Bunny

I agree with all above, but, if it is a small amount, this might be simplest: He sells the land, then gives each of you the tax free gift amount ($14,000) each year until he's given it all.

H21

It is not unusual for parents to sell land to their children for "$1.00, and love and kisses." Consult the attorney, please.

halfbuckaroo

I think Tanizaki is right. You should consult with a lawyer who handles estates and gifts. The answer is going to vary based on the value of the property, whether your state has a gift tax or not, whether the property has increased in value since he acquired it, etc. Federal gift tax shouldn't come into play unless the land is valued at more than the lifetime exclusion amount. Consulting with an attorney who handles these matters should be pretty inexpensive - you should just need an hour or two of their time unless they are actually handling the sale for you.

bedhead

To add to what Tanizaki says: tax implications really depend upon jurisdiction. You give AskMe answerers no indication of where you are. We can normally assume that this means you're an American, but I gather even America has varying jurisdictions. I'd suggest a solicitor, and the deletion of this question.

pompomtom

Sure, but whether it makes sense to do that kinda depends on the value of the land. Depending on where it is and how it's zoned, 20 acres could go for anywhere from $10K to a few million. Spending $3K to consult with an attorney about how to most efficiently structure the sale of a $30,000 property is likely to waste money, not preserve it. Unless the land is worth millions, or you expect the rest of your dad's estate to be in the millions, you won't need to worry about (federal) gift or estate taxes; it'll just come off his lifetime exclusion.

ROU_Xenophobe

The only benefit to doing the $14k/year as suggested would be that the giver would not have to file a gift tax return. Even if the gift to each sibling is, say, $100k, that would fall under the lifetime exclusion - the giver just has to file a gift tax return but there would be no tax due unless the total gifts exceed his total lifetime gift tax exclusion (currently $5.34 million). It's well worth spending a few hundred bucks for an hour talking to an estate attorney about this to make sure you're getting everything done correctly vs. taking the advice of internet strangers, though.

bedhead

Odds are he should die with it. But it's hard to say because we don't have much info.

jpe

he wishes to give to my brother, my sister, and myself now, not when he passes We are trying to get this process done fairly quickly If he wants to give it to you now, and you're trying to get it done fairly quickly, why wouldn't you do what is easiest? "Easiest" also saves you money on lawyer fees.

Bentobox Humperdinck

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