What would the income tax be on the sale of a portion of a farm that was gifted to me that I currently live at and is also used as rental property?

good answer! An Enrolled Agent would be a good tax professional to ask!

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by Sherri on September 21st, 2009

Agreed!
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Thanks for the points!

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by Anonymous on September 21st, 2009

Sherri-shame, shame.

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by Possum on November 28th, 2009

An Enrolled Agent could also answer this question and there is a lot more than meets the eye in this question, eg: how much did the gifter pay for the property?

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by Sherri on September 21st, 2009

If this is in the USA, what the giftor paid for the property is irrelevant. The capital gains tax will be based on the difference between the fair market value (FMV) either currently, or at the time of the gift, and what he sells the partitioned plot for. I'm not familiar with the term enrolled agent which makes me think you are not in the USA. I don't know the location of the person who asked this question.

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by Thriftymaid on September 21st, 2009

I AM, most definitely, in the US and wouldn't live anywhere else!

You can google 'enrolled agent' or follow this link:http://www.naea.org/memberportal/Resources/ForTaxpayers/whatis_EA.htm

AND to figure the basis of the property, which is what you will use to compute your capital gains, you received as a gift, you must know its adjusted basis to the donor (how much did he/she pay for it, like I said, plus/minus any improvements, depreciation already taken, etc!) just before it was given to you, it's FMV at the time it was given to you, and any gift tax paid on it.

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by Sherri on September 21st, 2009

Are you an enrolled agent, Sherri. I had never heard the term before. I slept through income tax law class. The reason I said what the giftor paid was irrelevant because he may have also received it as a gift (if this is family property being passed down) so it would still go to FMV at the time of that transfer -- isn't that right? I always refer people out on tax matters. Good thing, huh.

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by Thriftymaid on September 21st, 2009

Yes, I am an EA. Many people have never heard of EAs, so you have lots of company!
And the basis is the LESSER of the fmv or the purchase price, so if he inherited as family property, there could very well be NO basis as the property was bought in 1902 for $500; never mind that the FMV is now $500K because the basis is the lesser of! ouchie!

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by Sherri on September 21st, 2009