Taxation for Inherited Property, Essay Sample for You

After Mario's Death

The U.S Tax System ordains the estate taxation principles and adjustment on the decedents' inheritance. The U.S. tax system embraces the effective tax rate of 40% on the property owned by the decedent on the date of death in excess of $5.1 million exemption adjusted in 2013. The application of the life time tax exemption of $5.25 million estate is relieved for the Mario's property since the amount for the estate is reported as $1 million. The provision of the rezoned land sales subject to Income Tax Act (312 U.S. at page 644) defined under commercial land accentuates the provision of the polies covering the decedent's assets which is the subject in the Mario case above.

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The Mario case of contract to sell real estate for $1 million is subject to 312 U.S. 636 which assesses the decedent's share in relative to tax exemption provided of $5.25 adjusted based on the inflation rate in 2013. However, the Mario case is restrictive to the amount reported of real estate property worth $1 million since there was no other property disclosed on the diseased. The decedent is however not subjected to the any taxes on the amount of $1million property since it is below the life time gift exemption.

In the case where Mario's property was beyond the $5.25 million the decedent would pay estate tax after the death of Mario but in the case, estate tax was not payable due to exemption limit. The fair market value of $1million on the real estate would remain valid based on the Mario's agreement and the gain on sale is determined by the difference between the selling price and the basis of the real estate.

Before Mario's Death

If the sale of the estate had occurred before Marios death, the deceased would have to pay capital gains tax on $800,000 after the $200,000 tax basis for the property. The U.S. tax system does not reconsider's property auction thus the $1million property would not be included in his assets but the $1 million payment would have been recognized as gain of $800,000. The fair value attributable to the Mario's decedent of 1 million will not be subjected for capital gains since inheritance of the property is accounted by the U.S. tax system on basis is stepped-up to its fair market value on the date of deceased death.

The time that the sale occurred

The estate sale was conditioned on a rezoning for commercial use and the case stipulates that Mario before his death entered into contract of the sale of property amounting to $1 million on June 1st, 2013 where a $50,000 deposit was placed. The considerable controversy rezoning lead to approval of the sale of real estate on November 10th, 2013 where the balance of $950,000 was paid in full satisfaction of Mario's contract. The deceased succumbed to death on November 1st, 2013 which mean that he dies before the sales of property since approval was done at 10th November after his dead. In the case where the rezoning could not been approved, after the death deceased, the initial amount of 50,000 in escrow deposited by the purchaser would be refunded by the Mario's decedent and the sale would not take place according to the initial contract terms. In conclusion, the sale occurs in 10th November after death of deceased which occurred on 1st.

Works Cited

George W. Keck 49 T.C. 313 (1968),. No. rev'd 69-2 USTC {9626, 24 AFTR 2d 69-5554, 415 F.2d 531 (CA-6, 1969). 1968.