Ask Terry Questions Capital Gaines on property that was a gift

Capital Gaines on property that was a gift

By Terry Savage on May 16, 2020 | Housing / Real Estate

Terry, I was gifted 25 acres (15 acres 30 years ago and 10 acres 15 years ago) I’m now preparing to sell the property to a forest preserve as 1-25 acre parcel and wondering what the Capital Gaines issues I might have as the Basis is at 0.
I’m 59 and thinking I will be moving out of state in the next 5 years, pondering if I should purchase a house in IL or just rent until I move. Then need to consider if I’m better setting this up as a 1031 land transfer however then I think I only have 180 days/6 months to make this happen. wondering your thoughts . Thanks and I enjoy listening to you on WGN.

Terry Says

You have outlined the situation pretty well. It depends first on whether the title was transferred when the gift was made, and then whether you can establish the value at the time of the transfer to create a cost basis.
I was going to suggest a like/kind exchange — but if this was land, then you probably can’t exchange it for a residence. Perhaps how is the time to buy land in a low-tax state, where you will ultimately build your residence? You could do that within the time limit for an exchange.
I would NOT buy a residence in Illinois now, for obvious reasons, unless absolutely required by a job.
Please check with your accountant for specific advice on these issues.

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