Cost basis of gifted property
My husband died in 2005. In 1983 we were both given 75 acres of
farmland. I recently sold it and now have to figure out capital
gain tax but cannot figure out what the land was worth in 1983 because
the records do not go back that far. Also, do I have to claim that
far back or only to 2005? Help!
In 1983 when you were given the land,
it was a gift for tax purposes. Your basis in a gift is not the value at the time
of the gift; that stepped-up basis only applies to inheritances. Your basis in
a gift is the same as that of the person who gave it to you. Therefore, you have
to go back further than 1983 to determine the original acquisition price. Usually,
the local property tax collector has these records.
you inherited your husband's half of the land when he died in 2005, half of your
basis in the 75 acres is the value at the date of his death. The other half of
the basis is half of the original acquisition cost. For example, if the land originally
was purchased for $10,000, then half of that -- or $5,000 -- is your cost basis.
If in 2005, the value of the land was $100,000, then half of that -- or $50,000
-- is your cost basis. Your total basis for determining gain or loss on the sale
would be $55,000. Improvements can be added to the cost of the property unless
they are otherwise included in the date-of-death value from your husband.
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