Is profit from sale of an empty land inherited from dad taxable?

[singh]

My client sold a piece of land he inherited from his father.

The dad passed away in 2016 and the mom added her son's name on the deed in 2017. The son sold it in 2022.

He will file 'married file joint' tax.

He received 1099S and he received $460,000 as his share and his mom received $1000,000.

What are the tax consequences for this sale?

Any help please.

[TaxGuyBill]

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@singh wrote:

My client sold a piece of land he inherited from his father.

The dad passed away in 2016 and the mom added her son's name on the deed in 2017. The son sold it in 2022.

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You need to clarify. Your second statement makes it sound like he received a Gift from his mother, not an Inheritance from his father.

And you mean that THEY sold it in 2022 (mother and son)?

Yes, it is taxable. I think your actual question should be "What is the Basis?".

Was it solely owned by the father? Or was it jointly owned by both father and mother? How was the title held before the father died? Was this in a Community Property State?

[Accountant-Man]

Of course it's taxable. Under what concept would it not be taxable?

Perhaps you mean how much is the gain?

[singh]

Thank you for your reply.

The title was jointly under father and mother only. When the father passed away in 2016 the mother added her son's name on the deed in 2017. Then in 2022 the mother and the son sold it.

The mother received $100,0000 and the son received 1099S for $460,000.

I hope the above info. would help.

Thank you in advance.

[singh]

So the $500,000 tax exemption rule for married couple only applies to residential home.

I believe I have to calculate the profit from the sale.

Thank you for your help.

[sjrcpa]

"Was this in a Community Property State?"

What was the date of death value?

Was $460,000 the entire sales price? Or son's share?

Mother made a gift to son in 2017. Son gets proportionate share of mother's basis. So far, we have no idea what that is.

[singh]

Sorry for the confusion. The father died in 2016. $460,000 was the son's share. Yes, it is in CA- Community property state.

Thank for your help.

[singh]

I missed the date of death value of the property: I have to find that out from the son.

Thank you.

[sjrcpa]

The $250,000/$500,000 gain exclusion from tax applies only to one's principal residence and has ownership and use requirements.

[sjrcpa · Accepted solution]

The mother's basis became the fair market value on the date of the father's death.

[singh]

Thank you so much for all your help. The information you provided was very useful.

[sjrcpa]

You're welcome.

[qbteachmt]

"When the father passed away in 2016 the mother added her son's name on the deed in 2017."

Keep in mind these two items do not relate the way you keep stating them. There is no "When" about this.

The father's death in 2016 stands alone.

The adding of the son to the deed also stands alone.

They are not related.

[GeorgiaRe Tired]

I agree. If mom just put him on the deed, it's a gift and was over the gifting limit and goes against unified credit (a gift tax 709 should be filed IMO) His basis is stepped up since it passed at death to the mom. IDK about community property. Another issue altogether.

[singh]

Thank you so much for your input. 

[singh]

Thank you so much for your help. Since I do not handle gift tax I referred my client to another tax preparer.