Page 1 of 3 1 2 3 LastLast
Results 1 to 10 of 24
  1. #1
    Join Date
    Mar 2019
    Posts
    26

    Default How are Capital Gains Taxes Calculated on Property You Inherit and Improve

    My question involves real estate located in the State of: Virginia

    My minor son inherited a fixer upper. While waiting my son to turn 18 I fixed it up to increase it’s value.

    I worry that the taxes could be real high from selling it.

    Would it be a good idea to move to fixer upper and sell a current house (living here since 2005) to reduce the taxes for selling a real estate?


    Thank you.

  2. #2
    Join Date
    Mar 2013
    Posts
    18,340

    Default Re: What Would Be Taxes from Selling a Fixer Upper That My Minor Son Inherited

    That a minor inherited the property could make this complicated.

    So, before our tax expert gets here, please answer the following questions.

    From whom did your son inherit the property?
    When did that person die (date)?
    What was the fair market value of the property at the time of death?
    How old is your son?
    Was the property deeded to your son or is it still in the name of the deceased or owned by a trust with your son as a beneficiary?
    Itemize what you did to fix up the property and how much. Some of it might be capital improvements, some of it might be repairs.

    As to selling your house and living in the property, that could work if you were the owner and it was your own taxes in question.

    It's the ownership issue that you need to explain.

  3. #3
    Join Date
    Oct 2006
    Posts
    16,474

    Default Re: What Would Be Taxes from Selling a Fixer Upper That My Minor Son Inherited

    Your son got a stepped up basis to fair market value when he inherited the fixer upper. The money spent fixing up the fixer upper would add to basis.

    The computation for tax purposes would be basis plus cost of improvements = total basis. Sales price, minus selling expenses, minus basis equals capital gain or loss.

    The capital gain or loss would be reported on your son's tax return, whether your son is a minor or not. Its possible that your son would actually owe no tax at all.

    You need a consult with a tax pro with the actual numbers involved (or potential numbers) to see what the potential tax bite might be. I suspect that it won't be very high, but only someone who can review all of the details can tell you for sure. I also suspect that it would be wise to wait until after April 15th to get that consult. Things tend to be busy right now for tax professionals.

  4. #4
    Join Date
    Oct 2014
    Posts
    8,238

    Default Re: What Would Be Taxes from Selling a Fixer Upper That My Minor Son Inherited

    Quote Quoting llworking
    View Post
    Your son got a stepped up basis to fair market value when he inherited the fixer upper.
    We'd need more information to know that there is a stepped up basis. While in most cases that's true, there are some in which it would not be. I'd want to know the details of how the son "inherited" this property to know for sure, and how long ago it took place.

    Quote Quoting llworking
    View Post
    The money spent fixing up the fixer upper would add to basis.
    More information on that is needed too. The son didn't spend the money for the improvements, the father did, and if the father didn't own the property then that may not result in an increase in basis. The details would matter. How much were the improvements made to the place for starters.

    And it would also matter what has been done with the home since the son inherited it. Has it been rented out? Was it vacant? Something else?

  5. #5
    Join Date
    Mar 2019
    Posts
    26

    Default Re: What Would Be Taxes from Selling a Fixer Upper That My Minor Son Inherited

    The house was willed to my son in Feb 2016. However, the custodian was a family member from another state, who wanted to sell the house.

    I had an attorney involved. As a result I was appointed as a custodian of my son’s assets by court in October 2016. Since Feb 2016 the house was vacant.

    It was appraised in 2016 for $18.500. The improvements cost me about $120.000. I kept every receipt. Other than gas, the car cost to drive there, and many hours of my time.

    The son turned 18 in Nov 2018. He is a high school student. He had no finances to fix the house.

    My son’s father passed away in Feb 2016. The whole estate he willed to my son. However, the deceased’s family member was appointed as an executor. There is no trust, only the will.

    The executor wanted to cell the house. I had an attorney involved. I payed to the attorney and I payed the executor’s expenses. As the result I was appointed as a custodian of all my son’s assets by the county court in October of 2016.

    The executor had appraisal of the house of 2016 with the value of $18.500. However the fair market value in Feb 2016 was about $55.000
    It took about $120.000 to repair. The whole house was renovated. New flooring, new walls, new roof, HVAC installed, back porch, siding, painting, doors, showers, etc.

    My son turned 18 in November 2019. He still is a high school student. He had no finances to pay to the attorney or to fix the house up.

    I am new to this site. I was thinking that I’m replying to two different people. I didn’t mean to repeat myself. Sorry, if it caused a confusion.

    And I don’t mind being called a “father “

    Thank you to everybody for your valuable advices.

  6. #6
    Join Date
    Oct 2006
    Posts
    16,474

    Default Re: What Would Be Taxes from Selling a Fixer Upper That My Minor Son Inherited

    My opinion is that you loaned the money to your son to fix up the house. It would be unreasonable to assume that you did not intend it to be a loan.

    However I am confused about the 18,500 valuation vs the 55,000 valuation. Which of those valuations came from a professional appraiser? If not, where did they come from?

    What does a professional appraiser say the house is worth now?

  7. #7
    Join Date
    Mar 2019
    Posts
    26

    Default Re: What Would Be Taxes from Selling a Fixer Upper That My Minor Son Inherited

    $18.500 was a value in the appraisal that a previous executor used to justify the price to sell the house for $20.000 cash before I got an attorney involved.

    After I was appointment as a custodian of all my son’s assets, a realtor company had a buyer for the house who offered $55.000 cash for it. That was making more sense because only the lot is appraised by the county for $36.000

  8. #8
    Join Date
    Oct 2006
    Posts
    16,474

    Default Re: What Would Be Taxes from Selling a Fixer Upper That My Minor Son Inherited

    Quote Quoting A110ver
    View Post
    $18.500 was a value in the appraisal that a previous executor used to justify the price to sell the house for $20.000 cash before I got an attorney involved.

    After I was appointment as a custodian of all my son’s assets, a realtor company had a buyer for the house who offered $55.000 cash for it. That was making more sense because only the lot is appraised by the county for $36.000
    Ok, the just throw the whole 18500.00 valuation out of your mind and stop even discussing it. The FMV of the property was at least $55,000 when your son inherited it. It appears that you have loaned your son $120,000 to fix up the house since then.


    Again, what does the house appraise at now?

  9. #9
    Join Date
    Mar 2019
    Posts
    26

    Default Re: What Would Be Taxes from Selling a Fixer Upper That My Minor Son Inherited

    I didnít appraise it yet. It could be sold somewhat between 275.000 and 300.000. The similar houses in the area are sold for $100 a square foot. The house is 3100 square feet.

    If the taxes for selling are too high, we might have to move in and sell our current house instead.

  10. #10
    Join Date
    Jan 2006
    Posts
    38,867

    Default Re: What Would Be Taxes from Selling a Fixer Upper That My Minor Son Inherited

    Quote Quoting A110ver
    View Post
    I didn’t appraise it yet. It could be sold somewhat between 275.000 and 300.000. The similar houses in the area are sold for $100 a square foot. The house is 3100 square feet.

    If the taxes for selling are too high, we might have to move in and sell our current house instead.
    i disagree with llworkings take on the numbers.
    An appraisers statement is legally dependable in court. A fair market valuation is not. A Realtor is not licensed to provide a true value. Their best guess is rarely objective and is legally undependable

    an unrealized sale is not proof of a value. One even wonders why there was such an offer (was there an actual written and signed offer?) if you didn’t intend on selling once you assumed the role of custodian of,your sons finances.


    The numbers in whole sound unrealistic.

    get an appraisal of the house now if you want to know where you (your son actually) is.

    1. Sponsored Links
       

Page 1 of 3 1 2 3 LastLast

Similar Threads

  1. Federal Taxes: Capital Gains Taxes on Fire Damaged Inherited Property
    By lawfacts in forum Tax Law
    Replies: 1
    Last Post: 05-17-2018, 12:09 PM
  2. Federal Taxes: How Are Capital Gains Taxes Calculated After a Life Estate is Terminated
    By 6partsremoved in forum Tax Law
    Replies: 9
    Last Post: 03-21-2017, 11:30 AM
  3. How to Calculate Capital Gains Taxes on Jointly Owned Property Used by Only One Owner
    By Primetime in forum Buying, Selling and Conveying Real Estate
    Replies: 1
    Last Post: 03-11-2017, 01:19 PM
  4. Replies: 4
    Last Post: 10-23-2015, 06:17 AM
  5. Federal Taxes: Capital Gains Taxes on Sale of Property Held in a Life Estate
    By tauruz in forum Tax Law
    Replies: 1
    Last Post: 03-15-2010, 04:54 PM
 
 
Sponsored Links

Legal Help, Information and Resources