Quarryville, PA asked in Tax Law and Probate for Pennsylvania

Q: Pa inheritance tax method? Mom died. the 100 acre farm(Pa) in clean and green will be sold outside of family.

One person said to use C & G assessment value instead of fair market value to compute inheritance tax. True?

Related Topics:
2 Lawyer Answers
W. J. Winterstein Jr.
PREMIUM
Answered

A: PA inheritance tax on bequests to child/children is five percent. When that is paid, the property enjoys a "stepped up basis", so that on a subsequent sale of the property, any capital gain is computed as the difference between the stepped up basis and the sale price, both for PA and federal income tax purposes. Most probably, it would be tax-smart to pay the 5% tax now, rather than the much larger income tax later.

A: First of all the Department of Revenue will usually accept the assessed value (adjusted for county common level ratio) for computing inheritance tax, but it is not likely to accept the assessed value as reduced for Clean & Green.

Second, whether you want to report a low value for inheritance tax purposes (4.5% tax if all heirs are children or lineal heirs) may depend on what the heirs plan to do with the property. If the plan is to sell the property or develop it, may be better to report a higher fair market value (ie., get an appraisal or other valuation) and pay the inheritance tax so heirs can establish a higher income tax basis in the property and then reduce their income taxes (Federal tax rate likely 15% plus PA tax of 3.07%) when the property is sold.

Take the time to meet with an attorney and review your options before you file that tax return

Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.

The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.

Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.