Tax questions

April 01, 2000

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

In 1937 my wife and four sisters and brothers inherited the homestead down in Virginia when her father died. In 1957, a flood wiped out the courthouse and all existing records. In 1999 the property was sold for $44,000 and each descendant received a check for $8,800. For tax reporting purposes, how do you determine the cost or basis of the property sold?

The basis of this inherited property is the fair market value on the date of your wife's father's death. If the family has any records associated with the administration of your wife's father's estate, you may be able to identify the value of the property at that time from those estate records.

Otherwise, you may need to review old property tax records or other sources. If the local courthouse burned down, sometimes the state may have archived the records on microfilm. You should check with them. The local paper for that time period would be a good source to estimate the value of the property in 1937.

This fair market value at date of death is the starting point for determining the adjusted basis of the property. Increases to basis include improvements that add to the value of the property and additions. Decreases would include depreciation allowed or allowable if the property was used for business or rental purposes.

F. Carter Heim, CPA, Heim & Associates

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

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