Tax Ramifications of Farmland Sale
Grandmother sells zero cost basis parcel of farmland for $50,000 to her son. Parcel has market value in excess of $200,000. Lifetime gifts to son remain under $1 million. I believe an informational gift tax return was filed.
Question: Could IRS come back on grandmother and demand capital gain tax be paid on market value of farm? ie. would the IRS treat the entire transaction as a sale instead of a gift since some consideration was paid? Does the fact that a gift tax return was filed negate this concern?
1 Answer from Attorneys
Re: Tax Ramifications of Farmland Sale
What you have here is a part sale and part gift. If there was no consideration then it would be a gift. Since there is a consideration and there is no basis in the property, there is a gain of $50,000 and a gift of $150,000..
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