Burial Plots

Technical topics regarding tax preparation.
#1
dsocpa  
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Client's mother passed away leaving 4 unused burial plots. The plot certificates were found while going through all the paperwork after she passed. The plots were purchased many years ago for several thousand dollars. Client can't seem to give them away. He would like to simply pay what he can determine is the FMV based on recent sales on the online sites he has researched (couple hundred max). Then he would simply try to sell them on his own. My question is are the plots considered real property and all the tax implications thereof? Or are they personal use and the sale generates an unreportable tax event - no gain or loss unrecognized?

I know everyone is super busy right now and I appreciate any response many times over!
 

#2
makbo  
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dsocpa wrote: My question is are the plots considered real property and all the tax implications thereof? Or are they personal use and the sale generates an unreportable tax event - no gain or loss unrecognized?

I don't know the larger answer, but real property can be personal use property - for example, someone who owns the house they live in. And gain on disposition of personal use property is typically taxable, unless specifically excluded, such as via Sec. 121.
 

#3
sjrcpa  
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If client inherited these plots, client's basis is their FMV on date of death. It is not mother's cost.
 

#4
makbo  
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sjrcpa wrote:If client inherited these plots, client's basis is their FMV on date of death. It is not mother's cost.

The OP didn't say otherwise. I understood he wanted to purchase the property from the estate or trust (at current FMV), with essentially zero gain/loss to the estate/trust, and then deal with it on his own at some future time. Maybe there are other heirs who just want cash, not the plots?
 

#5
dsocpa  
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Thank you for your prompt replies. Didn't expect any this quickly!
Client did inherit the plots, although, they aren't listed on any inventory or in the trust document he gave me.
I understand the step-up basis. She passed in 2017 so likely what the plots were worth on DOD isn't much different than if he sold them today (likely less it seems). He has found the whole process a nuisance actually and doesn't want his siblings to have to deal with getting them out of the estate. If he purchases them from the estate the cash is distributed amongst the beneficiaries - definitely their preference as none of the family members care to use the plots (very undesirable location).
BTW, not sure if it makes a difference, she died as a resident of FL and the trustee is in MD where the plots are located.
 

#6
Nilodop  
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Is the cemetery one covered by section 170(c)(5)? If so, consider a charitable donation of the lots back to the cemetery entity. Probably a simple quitclaim deed. Think about who makes the contribution.
 

#7
dsocpa  
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Good idea. I will look into whether section 170(c)(5) would apply. If that is the case then without a doubt that is the way to go. Thanks so much Nilodop
 

#8
Joan TB  
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In Texas, my parents' cemetery plots are recorded by deed in the county land records, and are considered real property just like any other piece of land. You might want to make sure Mom still held title at her death.

Updating the deed/title may require an attorney, especially since these weren't handled as part of the probate.
 

#9
dsocpa  
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Joan TB thank you. That is what is was trying to get at with my original post - the plots as real property.
 

#10
dsocpa  
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Quick ?? Joan TB, the plots were not listed as part of the trust but there was a pour over will. I am assuming the plots would be included as part of the pour over will.
 

#11
Joan TB  
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Sounds like a question for the lawyer who handled the trust. My guess would be - probably yes, but I am not an attorney.
 

#12
dsocpa  
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Thank you Joan. I have informed the client in that regard and referred him to the Orphan's court of MD. Apparently, he might be able to file a petition for permission to distribute to the plots for no consideration to whomever as burial plots are not considered real property in the state of MD.
 


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