A family member gave you (or you inherited) a piece of property, which you now want to sell. Do you know how to calculate basis for income tax purposes? And how do you determine what capital gains tax you might owe?
Most people understand that there is no tax due on a gift or an inheritance. Unfortunately, that understanding is too simplistic. You might owe some income tax even in cases where there is no estate tax to pay. You might pay income taxes, for instance, when you decide to sell inherited assets (or assets that were given to you).
But how much tax might you owe? For most kinds of inherited assets, it depends on how much capital gain you recognize on sale of the asset. And that requires an understanding of the concept of basis for income tax purposes.
In this podcast episode, we discuss the concept of basis and explain the basic (did you see what we did there?) rules. This information might not reduce your tax bill. But it should help you understand how to control when income taxes have to be paid.