58 Wiggin Farm Road/Moultonboro/9.5 Million/Squam Lake

[Biggd]

Originally Posted by tbonies

The next year should be interesting. Inventory is starting to rise at the high end and "Price Improvements" (!) are popping up on a regular basis.

I think we've seen the top of the market for a while.

[Mr. V]

Originally Posted by Biggd

I think we've seen the top of the market for a while.

Indeed...."Supply and demand" will lead to a downturn in valuation as the current owners and buyers, baby boomers, die off and there are fewer well-heeled buyers to take their place.

[TomC]

...but more buyers always seem to be there. Thirty years ago I looked at a nice cottage in Hanson Cove they wanted $125K for and I thought they were out of their minds!

[Sue Doe-Nym]

Some of us would like to leave their waterfront properties to the next generations. That has many positives attached, including their enjoyment of the property with their families, and they can inherit at the stepped up value, which can save an enormous amount in taxes. Of course, that can change, depending upon which political party holds the reins.

[John Mercier]

Originally Posted by Sue Doe-Nym

Some of us would like to leave their waterfront properties to the next generations. That has many positives attached, including their enjoyment of the property with their families, and they can inherit at the stepped up value, which can save an enormous amount in taxes. Of course, that can change, depending upon which political party holds the reins.

Trusts bypass any of that regardless of what party holds the reins in the future.

[FlyingScot]

Originally Posted by John Mercier

Trusts bypass any of that regardless of what party holds the reins in the future.

True, but Sue's general point remains--people/families may hold properties for a VERY long time. With the huge increase in values, my sense is that today's buyers will hold even longer. If you bought 30 years ago, you could be looking at your lake house as one of your largest assets, and selling could have a meaningful impact on overall quality of life. But if you are buying today, you are likely already set for life

[John Mercier]

But if they hold, the step-up value doesn't matter.
It matters when you sell and have to pay capital gains tax.

[Sue Doe-Nym]

That’s one of the considerations….if the heirs decide to sell, they avoid capital gains taxes on the property unless the total estate exceeds the maximum allowable amount, which is $10 or $12 million, I believe.

[P-3 Guy]

Originally Posted by Sue Doe-Nym

That’s one of the considerations….if the heirs decide to sell, they avoid capital gains taxes on the property unless the total estate exceeds the maximum allowable amount, which is $10 or $12 million, I believe.

That's not how the capital gains tax on the sale of real property works.

[Sue Doe-Nym]

If you are an expert, please feel free to enlighten us. This is academic, in the event heirs decide to hold on to an inherited property. It has been my understanding that capital gains taxes can be avoided on inherited real property because of “stepped up value” at time it’s inherited. Maybe I misunderstood our attorney. It seemed pretty straightforward to me.

[P-3 Guy]

Not an expert, but I am familiar with the basic concept of capital gains on the sale of real property being subject to tax.

Yes, real property inherited upon the death of the owner generally receives a step-up in basis and the new owner takes the property with a new basis, which is the property value as of the date of death. But your post I quoted is about heirs selling property, with no mention of when that sale might occur or what the value at the time of sale might be. If the property being sold is not a primary residence, any gain in value from the date of the previous owner's death to the date of sale will be taxed as a capital gain, either short term or long term, depending on how much time elapsed. If the property is a primary residence, as defined by the IRS, and certain timing rules are satisfied, up to $250k of capital gain is exempt for a single person, and $500k for married couples. This has nothing to do with the value of an estate.

https://www.investopedia.com/ask/ans...inhomesale.asp

[John Mercier]

When you inherit a property, you pay the estate tax - actually the estate does if the assets are over the current $13.61 million basis.
When you sell an inherited property, you pay capital gains. Capital gains involves figuring the basis for the investment.

A step-up basis means that if my grandfather paid $25K for a property, and I inherited it at $3 million, then sold it for $3 million. I have $0 capital gains.
Without the step-up basis, my basis would be the $25K plus additional upgrades, but leaving me with a capital gains of roughly $2.9 million plus or so.

If I don't sell it. I don't have a capital gains to pay, and so the step-up value has no effect.

[P-3 Guy]

Originally Posted by John Mercier

When you inherit a property, you pay the estate tax - actually the estate does if the assets are over the current $13.61 million basis.

Right, any estate tax owed is charged to the estate, not any party inheriting property from the decedent. And yes, an estate would need to be pretty big to incur an estate tax, under current law. (But don't forget to reduce the amount of the estate tax exemption by any gifts made by the decedent that exceeded the annual gift tax exclusion for the year when the gifts were made.)