Will I have to pay taxes on land sold

MrsO Member Posts: 1 Newcomer

Hello... this is my case… about 12 years ago after my mother's death a paternal uncle reached out to let me know that my paternal grandmother had left me some farming/undeveloped land. We visited and they signed over the 16th we were inherited. This year they made an offer to buy back said land. We agreed on a price and we will be signing the paperwork soon. Lawyers tell me next year we will receive a 1099 for the sales proceeds. Will I have to pay taxes on this sale? And how much?

Please help me figure this out

Best Answer

  • KeriC
    KeriC FreeTaxUSA Agent Posts: 93
    Answer ✓

    Hello @MrsO,

    Yes, you should receive a Form 1099-S reporting the sales proceeds from the sale of the land, but be sure to keep track of your sales price and expenses in case you don't receive the form. When filing your tax return, the sale will be reported in our software by selecting Income > Stocks or Investments Sold (1099-B). Your basis in the land will be the value of the land on the date of your paternal grandmother's death. A local realtor can help you determine the value of land at your grandmother's death.

     If you sell the inherited property for a loss, you can claim a capital loss deduction if all of the following are true:

    • The sale was a transaction where you didn't have a business relationship with the buyer.
    • You sold the property to an unrelated person. A related person would be a family member such as brothers, sisters, spouses, grandparents, or children. Relatives by marriage, aunts, uncles, cousins, nieces, nephews, and ex-spouses are not considered related for federal tax purposes.
    • You didn't use or convert the property for personal purposes.

    The Form 1099-S you will receive should contain the sales price and you will need to determine the value of the land on the date of inheritance (grandmother's death date) to enter as your basis in the property.

     If you have a gain on the sale, you will have to pay taxes on the gain. Because the land was inherited, you will be subject to the long-term capital gains tax rate. The following IRS tax topic details the capital gains tax rates that would apply, depending on your total taxable income for the year. Topic no. 409, Capital gains and losses | Internal Revenue Service (irs.gov)