Dear Tax Talk,
I inherited one-fifth of a parcel of vacant land in Florida. The property should have had a fair market value of $21,000. However, it was declared a flood zone buffer by the county wetlands division and nothing could ever be built on it.
The estate received about $7,890 for the property from the
Florida county. As 1 of 5 beneficiaries of the property, the county
issued me a 1099 for $1,700. Do I have to report the money from the
sale of inherited property to the IRS?
Yes, you are going to have to report the $1,700 that was on the Form 1099 issued by the county. However, let’s review the tax ramifications to you when you do report the sale.
The general rule is that when you inherit the property, you receive a step-up in basis to the date-of-death value, which is used to calculate your gain or loss on the sale.
Let’s go through your situation and what you need to do:
I hope this information helps you report the transaction correctly. Thank you for the great question and all the best to you.
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.