Can someone help?

[rkhan71]

Hello, fellow 'bookers,

I have a situation (confusing circumstance) where a sister and brother partitioned some farmland and exchanged some of their farmland to each other. The farmland was inherited from parents - I believe father to mother and then to children. Something like that.

The partitioning and exchange involves sister receiving from brother some of his land and $48,000 boot, and her giving some of her property to him for his purposes valued at a fair exchange I presume with corresponding exchange values. The attorney mentioned that land was to be partitioned and that brother would receive land located in Section X and sister would receive land in section XX and the $48,000 boot. They had to convey warranty deeds, and brother executed the promissory note.

In summary then, my client has a promissory note for $48,000 for 10 years with principal and interest being paid back from brother. I want to ignore the land exchange and only consider the 1099 that is issued each year for interest and principal or just interest. Not sure if she derived more benefit from the land requiring her (me) to record that too or just consider the recording of interest income on the tax returns for each year.

I know that information might be missing for understanding, but want to know the gist of inherited lands from parents and then exchanged between them with most importantly the "boot" received and whether to just report that money or is there more reporting that has to be done too?

Thanks in advance. I can provide more info if anyone wishes to review more for understanding.

Ray

[mactoolsix]

You might consider a better title - Can someone help? ABOUT WHAT? You get better responses.

[rkhan71]

Declaring Income for an exchange and promissory note - REVISED Title

Hello, fellow 'bookers,

I have a situation (confusing circumstance) where a sister and brother partitioned some farmland and exchanged some of their farmland to each other. The farmland was inherited from parents - I believe father to mother and then to children. Something like that.

The partitioning and exchange involves sister receiving from brother some of his land and $48,000 boot, and her giving some of her property to him for his purposes valued at a fair exchange I presume with corresponding exchange values. The attorney mentioned that land was to be partitioned and that brother would receive land located in Section X and sister would receive land in section XX and the $48,000 boot. They had to convey warranty deeds, and brother executed the promissory note.

In summary then, my client has a promissory note for $48,000 for 10 years with principal and interest being paid back from brother. I want to ignore the land exchange and only consider the 1099 that is issued each year for interest and principal or just interest. Not sure if she derived more benefit from the land requiring her (me) to record that too or just consider the recording of interest income on the tax returns for each year.

I know that information might be missing for understanding, but want to know the gist of inherited lands from parents and then exchanged between them with most importantly the "boot" received and whether to just report that money or is there more reporting that has to be done too?

Thanks in advance. I can provide more info if anyone wishes to review more for understanding.

Ray

[Snaggletooth]

Can't Expect A response

Ray, sadly I think I'm spending the time telling you what others are thinking. I don't think you'll get a response from serious respondents.

Reason being, there are too many moving parts in the situation you are describing, and I don't know how any of us can put ourselves in your shoes with the various nuts and bolts that can exist in an inherited situation like this.

For example, we don't know how the property was conveyed. We don't any of the terms of the vehicle, whatever it was - will, trust, estate, etc. And even so, we don't know the basis that imparts to the beneficiaries, and to what extent the non-loss regs apply to related taxpayers. Not knowing the basis means we don't know the gain or loss which may or may not be available. We don't know any of the particulars which may comprise the advantages of like-kind exchanges...

I'm sure your question was intended to be more simple than all this, but it's really not. For example, you state you want to ignore values and concentrate on the $48,000. You absolutely cannot do this and treat the $48,000 as "pure profit" unless of course it really is. If this is installment there must also be imputed interest.

Even if you were to provide all of the information mentioned above, this could very well still leave some things to fall through the cracks. There is no end as to how complicated these family situations can be.

If you can't spend time in considerable research, I might suggest a friend or contact in your local area who can help, even if it costs you a nickle. Having to share these elements with someone, and learning from them, will position you better to serve the next situation when it happens.

Sorry ...

[Burke]

I would recommend contacting the attorney who drew up the contract(s) for the transfer of properties. Obviously, someone had to come up with the difference in values of $48K and the terms of sale/exchange. If the land swaps were of equal value with the consideration of the boot, then it may be a 1031 exchange. But unless you have all the documents, you don't know. The attorney would know the details, and should be willing to discuss this with you on behalf of your client. After all, it is his client too. And its the client's responsibility to furnish you with all the details to determine the proper tax treatment.

[JON]

Not much help, but here is a guess

Land came from the parents - (someone should know value when they passed away) - after that the sale is an installment sale -if the inherited price per acre is the same - the $48,000 would mean that it increased in value more than the other during the time held. So I think you need those inherited values from - 706 or wherever...

[rkhan71]

Thanks everyone for comments

I did talk to client and we are going to go through the paperwork and start from scratch to figure it out. I will also draw information from the forum for any minutely related information.

Thanks again.

Ray