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Video instructions and help with filling out and completing sale of inherited property at a loss

Instructions and Help about sale of inherited property at a loss

Hello and welcome to the session this is Professor for hat and this session we're going to be looking at basis consideration specifically basis for gift and inherited property this topic is covered in an income tax course the CPA regulation section and the enrolled agent exam now always I would like to remind you my viewers to connect with me on a professional level which is thrilling then and if you don't have a link then I strongly suggest you create a LinkedIn account that's good for your professional image and it's a good way to network with other professionals in your industry if you have a Facebook account I do have a Facebook page you can also connect with me on a personal level you want to make sure you subscribe to my youtube this is where I have all my lectures so you are up to date if you like the lectures please like them put them in playlists share them with others if you know anyone that's interested email them the link so you will help others just like if you think those are helpful for you it's good to spread the wealth my Twitter my Twitter account is is listed on the screen and I do have a website where I listed all my lectures organized by course and chapter now if you are viewing this recording that means you are either a CTA student or an accounting student taken an income tax course in either situation I just wanna let you know about Jaeger CPA review if you like this recording you can view hundreds of hours of video lectures you can work thousands of multiple-choice for detailed solution simulation you can have access to a textbook audio lectures electronic flashcards plus others so if you happen to choose Jaeger if you're a CPA student or an accounting student the supplement or study for your exam use the PMF code you will get 10% off the best valued course you will benefit yourself and benefit this channel so today we're going to be working with basis consideration we saw this topic earlier when we talked about how to compute realized gain or loss we said we take amount realized and subtract from addy adjusted basis and this is how we get either a realized gain or a realised loss okay now we're gonna focus a little bit more about the basis here so what our base is generally speaking the basis is generally the cost of the assets whatever you paid for the asset remember we had addition we subtract the depreciation but generally speaking it's the cost of the asset now sometime the basis could give us some issues such as if we have a lump sum purchase what is a lump sum purchase is when we buy pay a specific dollar amount and we buy several assets this is a lump lump sum purchase okay what do we have today we

FAQ

Can I sell my inherited property at market price and make that money white by paying taxes?
An inherited property that you do not live in is considered an investment and the sale follows the rules of any sale. You get a stepped up basis in the property to the Fair Market value at time of death and your holding period is automatically long term. Any gain is taxed at a long term capital gain and any loss is LT capital loss. How the Stepped-Up Basis Rules Affect People Who Inherit Property"Basis" means an asset's cost for tax purposes. To determine whether you have a profit or less when you sell an asset, you subtract its basis from the sale price. If you have a positive number, you have a gain. If you have a negative number, you have a loss.However, a home's tax basis is determined in a different way when someone inherits a home after the owner dies. When you inherit property after the owner dies you automatically receive a "stepped-up basis." This means that the home's cost for tax purposes is not what the now-deceased prior owner paid for it. Instead, its basis is its fair market value at the date of the prior owner's death. This will usually be more than the prior owner's basis.The bottom line is that if you inherit property and later sell it, you pay capital gains tax based only on the value of the property as of the date of death.
How did Venezuela turn into a complete fiasco?
Hi there,I am not going to get into the political aspect of things i would like to get into the economic aspect.The other day i was reading about the Greek Economic Crisis i cam across an amazing quote and it goes something like this:“If you are Rich you have to be an Idiot not to stay rich and if you are poor you have to be smart enough to get rich”.This is true for a lot of Billionaires but it’s equally true for countries.Let’s see how this applies to Venezuela:Note: I will be comparing Venezuela with the City of Dubai.So let’s Begin shall we?Venezuela is a country in South America that has been blessed with amazing beaches and landscape. However it has also been blessed with Black Gold (i.e. Oil). Venezuela has the largest proven oil reserves in the world.So that is a blessing, right?Well, it can be both.When Hugo Chavez was the President of Venezuela he knew the power of this resource. Since the price of Oil remained quite high during his tenure there really wasn’t that much of a problem.Plus his really stupid policy yes i call it a stupid policy of so called “Democratization of Jobs” was a disaster in making.PDVSA’s payroll had doubled to more than 115,000 employees and the debt had risen to 34 billion $ since 2006.Now this may lead to the misconception that Venezuela must be increasing the amount of oil production, but they were not. It was more of a political tool that was being used by Chavez to make sure that people see him as someone who had brought jobs without the need of capitalism.This was not just limited to PDVSA but in other government sectors too.Now when you employ so many people you have to pay them salaries. So the Government spending tripled.This means that more government workers and more social programs.Social programs are good and can be a great tool to uplift people but when you do with an agenda to hook the population on free money, good luck building your country.Now none of this was a problem as long as those sweet petrodollars were paying the bills.Now as much as you would want to criticize Venezuela you would not want to reject their oil. No country in their sane mind would.In fact this what Nicolas Sarkozy had to say about Chavez:“I am glad about Venezuelan Elections, with their strong turn out that shows, once again the vitality of Democracy in Venezuela”.Add to this the stupid policy of Chavez that everything should be nationalized including small shops and you are creating a lethal cocktail of an economy that is fully dependent on one resource.By 2012 Brent Barrels were 95% of Venezuela’s export.Now to keep people happy and content PDVSA had higher costs than any other company due to staff increases.Now this is all good as long as the oil price is high enough to cover up the production cost.Now Chavez died in 2013 and to his credit he created a sort of cult following. He had cut poverty in half. Before him the poverty rate was 60%. By the time of his death the poverty rate had been reduced to 30%.And then come this man:And well the less said about him the better.So now he inherited a country where everything was nationalized. So whom do you tax? There are no Private companies to be taxed.Well you can’t tax the government employees.And as you would expect from a man like maduro who has no knowledge of Economics he decided to print more money.Need i say more?Now this led to sky high inflation rates. to the point that it had the highest inflation rate of any country in 2016.Ad when you want to blame someone for your own failures?Well you blame those evil capitalist western countries who are trying to destroy Venezuela.And well the the reason why you see things like TP(Toilet Paper) being sold on black market is simple, the official exchange rate of Bolivar is 1$=10Bolivar.But in reality the Bolivar has no value. So you have two options:Either you sell things at a maximum sell price set by the government which means you make a huge loss.You sell them on Black Market for a ProfitAnd the real exchange rate is 1$= 1,000 Bolivars.So now here is what you get when you bet everything on one resource. You pay the price.The situation is so bad that they Venezuelans are better off buying oil from somewhere else than extract their own oil as it is too expensive to extract oil in Venezuela.So Venezuela is an example of an idiot rich man gone broke. They failed to promote Private Companies and investors. They were hooked on petro dollars and due to this they never really thought of diversifying their economy.On the contrary let’s have a look at Dubai:Now have a look at this ambitious man. I personally respect him for his vision:His highness Sheikh Mohammed bin Rashid Al Maktoum is a smart man.From the beginning he and his father knew the importance of diversifying the economy.This is something his father said when Dubai struck oil in the 60’s and 70’s.So what did they do right?Well first they got rich by selling that oil. This meant that they made a huge amount of money by selling that oil.Next they were idiots enough not to stay rich and started investing that money.They invested heavily in the construction sector which created thousands of jobs.Since all these marvelous buildings were being built people would come and see them . This creates tourism and this in turn generates thousands of jobs.Next they created “Freezones” where companies could establish themselves and trade freely.This created more jobs.Dubai invested heavily in the IT sector and financial and business sectors. This in turn created more jobs.and the Result of all this?Natural Gas and Oil accounts for less than 5% of the GDP of Dubai.So i think this where my quote stands true.Thanks For Reading-TIME OUT
Do you think Gandhi family looted India?
Don’t Know:But there are some facts that can help a lot to understand this scenario.Total Scam Money (approx) Since 1948 : ? 198867184000000Congress ruled over India more than 49 years. mostly corruption were done under congress government.A chief Knows everything what their representative are doing. if the chief not dare to stop corruption, that means he is also corrupted.Sonia Gandhi is richer than Queen Elizabeth and the Sultan of Oman, claims 'Huffington Post' report.Congress President Sonia Gandhi’s son-in-law, Robert Vadra,According to the website named “Celebrity Net worth’ Robert Vadra has an estimated property worth a staggering USD 2.1 Billion that is around 11 thousand crore in Indian rupees. The website also says that Vadra amassed this property after getting married to Priyanka Gandhi.Rajiv’ 2.5 Billions,Swiss Magazine Confirms.The shocking exposure came from Switzerland itself. The most popular magazine of Switzerland, Schweizer Illustrierte, [dated November 11, 1991] did an expose of 14 politicians of developing nations who, it said, had stashed their bribes in Swiss banks. The title of the expose in German read “Fluchgelder — Die Schweizer Konten der Dictatoren”. In English it meant, “Curse of money — The Swiss bank accounts of the Dictators”. Rajiv Gandhi figured in the expose as one with slush funds in secret accounts. Schweizer Illustrierte is not some rag. It is the Number One Swiss magazine and sells some 2,10,000 copies. Its readership is 9,18,000 — some 15 per cent of Swiss adults. The magazine had mentioned specific amounts in secret Swiss accounts of different leaders with their pictures alongside.The report under the picture of Rajiv Gandhi, translated into English, read: “2.5 billion francs on the Indian secret accounts in Switzerland” of “Rajiv Gandhi, Indian”. Today the amount of 2.5 billion Swiss Francs equals 2.2 billion US Dollars. But as Rajiv was no more by then, it must become the family inheritance.Major Scams under UPA Government:Bofors Scam: The scandal relates to illegal kickbacks paid in a US$1.4 billion deal between the Swedish arms manufacturer Bofors with the government of India for the sale of 410 field howitzer guns, and a supply contract almost twice that amount.Cement Scam involving A R Antulay – ?300 million (US$4.7 million)[405]Commonwealth Games Scam (2010): The total worth of Commonwealth Games Scam is estimated to be Rs. 70,000 crore. The face of the scam was Suresh Kalmadi, the Congress party representative to the 15th Lok Sabha from the Pune constituency. Suresh kalamadi, Sheila Dikshit - the then Chief Minister of the State.Indian coal allocation scam (2012) : With the Coal Scam, the government bore a loss of Rs 1.86 lakh crore. The cag presented a report and stated the irregularities involved in the auctioning of 194 coal blocks. Coal ministry under United Progressive Alliance government. sriprakash Jaiswal , Manmohan Singh.Chopper Scam (2012): This scam is an example of bribery and corruption in India which involved many politicians, senior officials in India like former Indian Air Force Chief Air Chief Marshal S.P. Tyagi, and helicopter manufacturer Augusta Westland. The company had given bribe to get a contract for supplying 12 helicopters worth USD 610 million. A note presented on March 15, 2008 in an Italian court indicates that the Congress President Sonia Gandhi was also involved in the scam.Service Tax and Central Excise Duty fraud : Scandal worth : 19,159 crore. Comptroller and Auditor General of India (CAG) today said that there over 10,300 cases of fraud involving over Rs 19,159 crore in service tax and central excise duty during 2008-11.Dont know about the congress that they looted us or not, if they did not loot us then why did not they stop the people who looted us.After India's independence in 1947, Congress formed the central government of India, and many regional state governments.[18] Congress became India's dominant political party; as of 2015, in the 15 general elections since independence, it has won an outright majority on six occasions and has led the ruling coalition a further four times, heading the central government for 49 years. There have been seven Congress Prime Ministers, the first being Jawaharlal Nehru (1947–64), and the most recent Manmohan Singh (2004–14).Just simple question where is all this money and what is the source of Income for Gandhi family neither they are owner of reliance nor tata group.Sources : Corruption in year 1974;List of scandals in India - Wikipedia;Rajiv’ 2.5 Billions,Swiss Magazine Confirms.Sonia Gandhi is richer than Queen Elizabeth and the Sultan of Oman, claims 'Huffington Post' report | Latest News & Updates at Daily News & AnalysisRobert Vadra a man of Rs 11,000 crore!Images Sources : Google Images
At what point do you have to pay taxes on inherited property that you sell?
When you inherit property in the USA, you get what’s called a stepped up basis in the property - your basis in the property is set as the appraised market value on the date of death of the decedent who once owned the property.Your taxes on the sale of the property would be due with the tax return filing for the tax year in which you sell the property. To simplify things, I will not get into estimated tax payments; estimated tax payments might have to be made if sold earlier in the taxpayer’s fiscal year.You would have a capital gains tax due, and that could be either a short term capital gain (held for a year or less), or it could be a long term capital gain (held for a year plus a day or longer than that). But as noted in the comments by Gene Buettner , the gain on inherited property is long term - even if the deceased held the property for less than one year apparently. Excerpt here taken from link Publication 559 (2016), Survivors, Executors, and Administrators :“Holding period.If you sell or dispose of inherited property that is a capital asset, the gain or loss is considered long-term, regardless of how long you held the property. “The amount of the gain can be calculated by taking the sale price and subtracting closing costs to sell and then subtracting the stepped up basis.So so you might need some examples.Property inherited in 2017 and sold in 2017; taxes are short term capital gains and are due with the 2017 tax return to be filed by mid-April of 2018.Property inherited in 2015 and sold in 2017; taxes are long term capital gains and are due with the 2017 tax return to be filed by mid-April of 2018.
Can you sell a house to your child for 1 dollar?
From a real estate perspective, you can sell your house to your children for any price you please. If your intention is to avoid the gift tax, however, you’re out of luck. The tax man considers the difference between the fair market value of the house and the $1 sale price a gift, for which you must file a federal tax return. The sale may have capital gains tax ramifications for your children as well.It's Not An Arm's Length TransactionThe Inland Revenue Service lets you sell property at a loss -- as far as they are concerned, you made a bad deal. However, if you sell property to a child for less than the property’s true value, you’re not making a bad deal, you’re giving a gift. The tax man levies gift tax on the difference between the property’s appraised value and the sale price. For example, if your house is worth $150,000, and you sell it to your children for $1, you face a tax charge on the $149,999 difference.Federal Gift Tax ExemptionsUnder federal law, each individual can gift up to $14,000 -- the 2014 threshold -- to each child, each year, without incurring a gift tax. In addition, you can make tax-free gifts worth a maximum of $5,340,000 – again, the 2014 threshold -- over the course of your lifetime. Any exemption not used during your lifetime can be used to reduce your estate tax liability at death. Thus, if your home is worth less than $5.34 million, and you don’t have a significant history of giving, you likely won't pay any federal gift taxes. California does not levy a state gift tax.Taxing the Sale ProfitWhen your children sell the house, they pay capital gains tax on the profit. Because you gave away your home, your children inherit your tax basis. Generally, this means the original cost of the property. For example, if you bought the property years ago for $50,000 and it is now worth $150,000, your children’s tax basis is $50,000. If they immediately sell the house for full market value -- $150,000 -- they pay capital gains tax on $100,000. An exemption applies if your children live in the property for at least two years, after which they don’t pay tax on the first $250,000 in gain.Other ConsequencesTax matters aside, if you sell your house to your children for less than its fair market value, you may face a period of ineligibility for Medicaid benefits, because the transfer of the house is considered a gift. You also lose control of the house. Once you hand over the deed, your children can do whatever they please with the property -- including selling it -- without your consent.Source: Can You Gift a House to Your Children for $1?If you have any questions, need any help, please go to Wilmington Real Estate and contact us for help!Justin
Why do people forget that Donald Trump is a successful businessman?
People haven’t forgotten. People have examined Trump’s actual business history and concluded, “Oh, Hell no! That’s not what I call a successful businessman.”Trump has made himself rich at the expense of the people who do business with him, especially suppliers and employees. The classic free market argument for trade is, it benefits everyone. Division of labor lets people specialize in what they do best. Then I trade something I have of value for something you have of value. Taking what I have and refusing to pay me is called fraud.I find it shocking how far the GOP has drifted from their historical advocacy of free trade. They now embrace the idea that, “If it makes you rich, it must be good,” and, “Being rich is proof that a man is good.” Maybe in 2020 they can nominate a Mafia Don.
Is this residential land a gift or inheritance for tax purpose?
So lets unpack this:-US citizen parent gifts the $1500 US purchase of land in India to his US citizen son in 1998. Since this gift was below (and assuming no other gifts from him to you that year) the annual per recipient allowance, this gift did not eat into the father’s Family Unified Credit;-The US citizen son is the owner of the property from 1998, has a $1500 basis (What is an adjusted cost basis and how is it calculated?) and a current Fair market value of $100,000. If there was a real or deemed sale of this property by the son, the capital gain on this property would be $85,000;The question of how much US federal and California state tax the son would pay depends on a number of factors:How much Indian tax was paid on the sale of an Indian property?Would the son be eligible for a Foreign Tax Credit in the US for the Indian tax paid?Are there any other capital gains or losses by the son in the year that the capital gain took place?The answers to these questions are case specific, so I would advise the son to seek out an Indian tax advisor who can work with his US tax advisor.
How do you calculate capital gains tax on property?
When you sell your house, you are liable to pay tax. Gains or Loss which arise from the sale of capital assets, such as Gold, Debt Mutual Fund and Property etc are subject to tax under the Income-tax Act, under the head Capital gains. The tax paid on this amount of capital gains is called Capital Gains Tax. Conversely, if you make a loss on sale of assets, you incur a Capital Loss.The time period: Check the time period between when you bought the house/property and when you sold it. if you have inherited the property the period of holding will be considered from the date of purchase by your ancestors.If a property is sold within two years(from FY 2017-18 earlier was three) of buying it, it is treated as a short-term capital gain. This is added to the total income and taxed according to the slab rate.If a property is sold after two years (from FY 2017-18 earlier was three) years from the date of purchase, the profit is treated as a long-term capital gain(LTCG) and is taxed at 20% after indexation.The Purchase cost and Fair Market Value: If the property is purchased before 1 Apr 2001 then the fair market value of the property as on 1 April 2001 can be considered as the cost of acquisition. For ascertaining the Fair market value, it is best to engage the services of a registered valuer. Our article Fair Market Value: Calculating Capital Gain for property purchased before 2001 covers it in detailHouse improvement cost and transfer cost: While computing the cost of acquisition one can also add the costs incurred with respect to procedures associated with house improvement or transfer cost such as the will and inheritance, obtaining succession certificate, costs of the executor, property valuer etc.Find the indexation purchase cost: The long-term capital gain(LTCG) shall be computed as the difference between net sale proceeds and indexed cost of purchase. For indexation, the cost of acquisition should be adjusted by applying the cost inflation index (CII).Find the capital gain. Check out our Capital Gain Calculator from FY 2017-18 with CII from 2001-2002 For short-term capital gain = final sale price – (the cost of acquisition + house improvement cost + transfer cost).In case of long-term capital gain, capital gain = final sale price – (transfer cost + indexed acquisition cost + indexed house improvement cost).Saving Long Term Capital Gain: If there are any long-term capital gains, one may have to either pay tax on it at the rate of 20% or Buy a new property either 1 year before the sale OR2 years after the sale of the property/asset ORThe new residential house property must be constructed within 3 years of the sale of the property.Save capital gains tax by buying specified bonds u/s 54ECCapital Loss: Set off of Capital Losses: The Income Tax does not allow Loss under the head Capital Gains to be set off against any income from other heads – this can be only set off within the ‘Capital Gains’ head. Our article Capital Loss on Sale of House discusses it in detail. Long-Term Capital Loss can be set off only against Long Term Capital Gains. Short-Term Capital Losses are allowed to be set off against both Long-Term Gains and Short Term Gains.Carry Forward of Losses if the return is filed before due date: If you are not able to set off your entire capital loss in the same year, both Short Term and Long Term loss can be carried forward for 8 Assessment Years immediately following the Assessment Year in which the loss was first computed. To keep a track of your losses, the Income Tax Department has laid out that Losses for a year cannot be carried forward unless that year’s return has been filed before the due date. Even if it’s a loss return, you do not have any income to show – do file your return before the due date.Let's see with an example of short-term and long-term capital gainShort-term capital gain on Sale of PropertyMr. Kumar purchased a house for Rs 50,00,000 on Nov 2016. He then sold the house for Rs 65,00,000 in September 2018. His brokerage costs amounted to Rs 70,000 and the costs he incurred on the improvement of the house amounted to Rs 1,30,000. Since the sale of the house took place within two years after he purchased it, his short-term capital gain can be calculated as follows:Therefore, his short term capital gain of Rs 13,00,000 . if he is in tax slabof 30% as his short term capital gain would be to Rs 3,90,000.Example of Long Term capital gain on Sale of propertyI sold some property and know that the transaction will invite capital gains tax liability. My query is, when and how much should I pay as tax? Following are the details of the property:Bought in 2009-10 for Rs 20.50 lakh (including brokerage and stamp duty)Sold in June 2017 for Rs 42 lakh with Rs 85,000 as brokerage.How much would be the tax liability?The tax liability will be calculated as follows:Step 1: Calculating the cost of acquisition (Rs20.5 lakh).Step 2: Calculating the indexed cost of acquisition, which is the cost of acquisition * cost inflation index (CII) in the year of sale / CII in the year of acquisition (Rs20.5 lakh *272/148 = Rs37,67,568).Step 3: Calculating the LTCG [Rs41,15,000 (net of brokerage expenses)– Rs37,67,568 = Rs3,47,432)].Step 4: Calculating the tax on LTCG with cess (Rs3,47,432 * 20.60% = Rs71,571).Step 5: Applying the applicable surcharge depending on your total income for FY2017-18.Long-Term Capital Tax to be paid is Rs 71,571The resultant LTCG could be claimed exempt from tax if the gain is re-invested in a specified manner. One such reinvestment that qualifies for the exemption is the purchase of government-notified bonds (to the extent of the LTCG) within 6 months from the sale of the property). You need to buy Capital Bonds worth the Long-term capital Gain ie 3,47,432.The other alternative available for claiming exemption from long-term gains tax is by re-investing the sale proceeds in another property within prescribed timelines. If such reinvestment is not made, the LTCG or part thereof would be taxable.
Is it true that after Dec. 31, 2017, it will be a hassle to sell property in India without an Aadhaar card? My father recently passed away in the US, and I’m trying to settle affairs. He owned property in Baroda, will I have issues selling after NYE?
If you are an NRI (which I presume is the case), you are not eligible for Aadhar Card. So, you will need a identification card, which can be your OCI card.If you have Indian passport then you might need Aadhar and that will add more confusion as you are an NRI if you reside 183 days or more outside India.The best way is to contact Indian Embassy. Confusion regarding Aadhar Card is still going on and there will be more clarity in coming weeks.