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KJT LEGAL CORNER (November 2008 Article)
I am sure everyone is looking forward to the upcoming holiday season. This is always a special time of the year. My wife, Ann, and I are proud to announce the birth of our fourth child. Olivia Ann was born four months ago and things have been busy to say the least. Happy Thanksgiving to all the members.
If you have a legal concern or question regarding a general legal issue, please submit your question to me for consideration in future columns. I have enjoyed receiving your questions and look forward to more in the future.
Question: I inherited some land from my aunt in 2004. I want to sell the land now. What are the tax consequences? What are the capital gains, if any? How can I avoid paying tax on the capital gains?
Answer: You will owe capital gains tax only on the gain in value of the real estate from the date you inherited the property to the date that you sell it. The estimated value of the real estate is often listed on the inventory that was filed in the probate case. Without further information, you will probably pay 15% tax on the gain since property was held for more than one year and if you are in the 25% or higher tax bracket.
To avoid the capital gains tax, you may reinvest the proceeds from the sale in another property that is of the same nature or character as the one you are selling. This type of transaction is often referred to as a 1031 exchange (the IRS Code Section). In order to complete the 1031 exchange correctly and avoid paying tax on the capital gains, I strongly suggest contacting a Qualified Intermediary to facilitate the exchange according to the deadlines established by the IRS rules and regulations.
Philip J. Hundl is State Attorney for the K.J.T. State Attorney’s note: The information in this column is not intended as legal advice but to provide a general understanding of the law. Readers with legal problems, including those whose questions are addressed here, should consult attorneys for advice on their particular circumstances.
Submit your questions for this column via email to phundl@wadlerperches.com or via U.S. Mail to Wadler, Perches & Hundl, Philip J. Hundl, KJT State Attorney c/o KJT Legal Column, 105 W. Burleson Street, Wharton, Texas 77488.
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