$1 land transfer for Capital gains

[M7047]

Have a client who sold undeveloped land they bought in 1999. The deed says they paid $1 to save transfer taxes then. They obviously paid more for it than $1. Can they use the amount they actually paid or are they stuck using the $1 from the deed for capital gains?

[Lee B]

So if all the paperwork says $1,  did they pay the additional $ ??? in cash?

[Jim Oh Bkkr]

Remember, this is a legal document, not a financial document.  Every deed I have seen, (and I've seen a lot), started with:

"For the sum of $1 and other valuable consideration" (exact wording).  Maybe that is Ohio's legalese, but I've never seen a deed give a selling price.

[Lee B]

In order to avoid the transfer tax, I believe that closing statements would have to show the $ 1.00

[mcb39]

4 hours ago, Jim Oh Bkkr said:

Remember, this is a legal document, not a financial document.  Every deed I have seen, (and I've seen a lot), started with:

"For the sum of $1 and other valuable consideration" (exact wording).  Maybe that is Ohio's legalese, but I've never seen a deed give a selling price.

Nor, have I.  We just recently purchased a plat of land in WI.  My Warranty Deed only says "For a Valuable Consideration".  Have the client do some digging for paperwork, cancelled check, etc on the actual sale.  It is usually worth their while.  I have had some dandies in the past few years, where the land was practically worthless when they got it, but they forget about all of the costs of purchase and sale and/or any improvements they have made over the years.  You might be surprised ie: "Oh, I had a well put in, etc."

[Sara EA]

In most places, there has to be a monetary amount for a deed transfer to be recorded.  That's why gifted property is often shown with a sales price of $1, although the recipient never actually paid that dollar.  The deed transfer has nothing to do with the actual basis.  A donee will have the giver's basis; your client will have whatever s/he actually paid.  Get the actual sales docs.  Why do people try so hard to avoid cap gains tax?  They don't realize that the cg tax rate is much lower than ordinary income tax rates, in some cases zero.

[Catherine]

Are you looking online, or do you have the actual document? Around here, a lot of the older records (and yes, in many towns 1999 counts as "older" for records) the online database transactions are recorded with dates and names but no prices. 

[mcb39]

What's really neat, if you like history, and have a chance to read an abstract; do so.  These were issued before title insurance became the vehicle of use.  Abstracts can be many pages long and start out with the parent property.  They go back through every sale and parcel breakoff.  You will be amazed how many times a parcel or part of a parcel was sold over the years "for $1 and other valuable considerations.  I have an abstract for the property that I live on because it originally belonged to my husband's Grandfather, approximately 6 generations ago.  We also have a Quitclaim Deed with the same wording because abstracts were no longer in use when it was gifted to us for (you got it) $1 and other valuable considerations.  We didn't pay a penny, but did a considerable amount of improvements in 50 years.  If we were to sell it today, we would escape CG anyway because of it being our homestead property, as the law stands now.  This subject fascinates me to no end.

[M7047]

Thank you all. She says she does have proof that she paid more for it, just wasn't sure she could use it. Sounds like I can use the actual amount paid providing documentation exists.

[Sara EA]

mcb is right.  Those old deeds and abstracts are fascinating.  We have the deed to my in-law's home that they bought (for more than $1) from their father.  The deed passed from owner to owner, starting from when the house was built in the late 1800s.  The land boundaries are defined by from a certain tree to a certain boulder or neighbor (all long gone).  The tax stamps are actual stamps--the kind you lick and stick on--in a variety of colors.  Kind of like old stock certificates, which were works of art.