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Tax Law (Questions About Taxes)/Taxes on sale of gifted land

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Question
HI,

My parents gifted us land 5 years ago and we recently sold the property for 75000.  We used all of the proceeds to buy a new home.  My questions is would we owe capital gains on the proceeds minus  my parents cost basis or would we be able to avoid the taxes because it was reinvested in real estate.   I have also heard that you can deduct it from the inheritance taxes.  Could you please help me,  I live in Connecticut if that helps.

Thanks- Mark

Answer
Mark,

Thanks for your question.

You will owe tax at the capital gain rate on the excess of the sale price (minus selling expenses) over your parents' cost basis.  What you do with the proceeds does not have any effect on its taxability.

The gift will reduce the amount of estate tax exclusion you parents have.  Inheritance taxes strictly state, not federal, taxes so I can't speak to CT.  However, I doubt it will have any effect on your inheritance taxes.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

Expertise

I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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