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Question for the Money Doctors

Question submitted on Mar 19, 2014.

Question

My 4 children were given 300 acres of land by my mother and I have a lifetime estate(income) from the 300 acres. I want to buy the 300 acres from my children. After deducting the value of my lifetime estate (age 74) , how much can I pay them for the land and they not have to pay any income tax on it?

Answer

If your children received the land as a gift from your mother and she is still alive, their cost basis will be a carry over cost basis from her. This means their cost basis is equal to your mother's cost basis. Accordingly there may be a capital gain based upon the difference of your purchase price and the cost basis.

However, if they received this property as an inheritance from your mother's estate after she passed away, then they would have a stepped-up cost basis which means there will be capital gains tax if you purchased the property.

This is a very complicated matter and I highly recommend consulting with a CPA familiar with these tax planning matters. There are many issues that would not have the space to discuss and review here. Visit www.findacpapfs.org to find a CPA/PFS in your area.


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