I paid just $15 for 35 acres of land - what capital gains tax will I owe when selling?

So about 7 years ago, my great uncle passed away and left me this weird piece of land way out in rural Montana. The lawyer handling the estate said the land was basically worthless (no road access, super remote, can't build on it) so they listed it officially as a $15 transfer on the deed just to make it legal. I've been paying the tiny property tax bill every year (like $23) and forgot about it. Fast forward to now, and apparently some mining company is interested in buying all the properties in that area. They sent me a letter offering $87,000 for my 35 acres! I'm obviously going to sell because this is basically free money, but I'm worried about the tax situation. Since I only paid $15 for this land (technically), does that mean my capital gains would be calculated on basically the entire $87,000? What tax rate would apply here? I'm a teacher making about $58,000 a year if that matters. Would there be any way to reduce the tax hit? I've never dealt with capital gains before and I'm completely clueless about how this works.

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21 comments

Grace Johnson

•8M

You're looking at long-term capital gains tax since you've owned the property for more than a year (7 years in your case). The taxable amount would indeed be the difference between your basis ($15) and the selling price ($87,000), so approximately $86,985 in capital gains. For your income level of $58,000 as a teacher, you would likely fall into the 15% long-term capital gains tax bracket (which applies to single filers with taxable income between $44,626 and $492,300 for 2024). So you'd be looking at approximately $13,048 in federal capital gains tax. Don't forget about state taxes too - Montana has its own capital gains tax that you'll need to factor in. Also, you should document any improvements you made to the property while you owned it, as these can be added to your basis and reduce your taxable gain.

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Grace Johnson

•8M

Property taxes you've paid wouldn't count as improvements to increase your basis. Improvements would be things like putting in a road, adding utilities, or other physical enhancements to the property. The inheritance aspect is interesting. If you truly inherited the property, your basis would typically be the fair market value of the property at the date of your uncle's death (step-up in basis), not the $15 transfer amount. This could significantly reduce your capital gains. You should check the exact wording on the deed and possibly consult with a tax professional who specializes in inheritances to verify if you actually received a step-up in basis. This could make a substantial difference in your tax liability.

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Nora Brooks

•8M

I had a similar situation last year with some land I inherited from my grandparents. I was totally confused about basis calculations and capital gains until I used https://taxr.ai to analyze my deed documents and inheritance paperwork. Their AI system actually found that I qualified for a stepped-up basis based on when I inherited the property, which saved me thousands in capital gains taxes. The software analyzed all the documents related to my property transfer and identified the proper tax treatment. Since you mentioned this was an inheritance situation with your great uncle, you might have a stepped-up basis case too, which would mean your basis isn't $15 but rather the fair market value at the time you inherited it.

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Nora Brooks

•8M

The AI analysis was incredibly accurate for my situation. I did have an accountant review everything afterward, and he was impressed by how thorough the documentation and analysis were. The system caught nuances in my inheritance paperwork that I would have missed completely. It identified the correct date of death valuation which established my proper basis. Yes, it does handle state-specific issues! I'm in Colorado which has its own quirks with property transfers, and the system correctly applied Colorado's specific capital gains rules alongside the federal guidelines. I believe it covers all 50 states including Montana's particular requirements.

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Eli Wang

•8M

Just wanted to follow up about my experience with taxr.ai after I was initially skeptical. I decided to try it with my family cabin situation which was super complicated with partial inheritances and multiple owners. The system actually found documentation proving the property had been professionally appraised when my dad died, which established a much higher basis than what I thought. The step-up basis analysis saved me over $18,000 in capital gains taxes! Plus it provided all the supporting documentation I'd need if I ever got audited. For inherited property especially, it's definitely worth checking if you qualify for a step-up in basis rather than just using the recorded transfer amount.

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Zane Hernandez

•8M

I went through something similar with ancestral farmland last year. The biggest headache wasn't even figuring out the tax situation - it was trying to get someone at the IRS to confirm I was calculating everything correctly. Spent WEEKS trying to get through their phone system. Finally used https://claimyr.com to get through to an actual IRS agent. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. Basically, they hold your place in the IRS phone queue and call you when an agent picks up. Saved me hours of waiting on hold, and the agent was able to confirm that yes, I needed to use the stepped-up basis from when I inherited the land, not the nominal amount on the transfer paperwork.

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Zane Hernandez

•8M

They don't charge anything upfront - you only pay if they successfully connect you with an IRS agent. I think I paid around $20 when I used it, which was totally worth it to avoid spending my whole day on hold. I was skeptical too, but it's not a scam. They don't ask for any sensitive information - they just need your phone number to call you back. They're basically using technology to wait in the phone queue for you. I was connected to an actual IRS representative who answered all my questions about basis calculation for inherited property. The peace of mind from getting official confirmation was worth every penny.

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Ethan Scott

•8M

I need to apologize for my skepticism about Claimyr. After posting my doubtful comment, I decided to try it anyway because I was desperate to talk to someone about my audit notice. I honestly couldn't believe it when I got a call back in about 45 minutes saying they had an IRS agent on the line! The agent was able to answer all my questions about my situation and even helped me set up a payment plan for the taxes I owed. I would have spent a whole day on hold otherwise. For anyone dealing with capital gains questions like the original poster, being able to actually talk to an IRS person makes a huge difference in getting the right answers about your specific situation.

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Lola Perez

•8M

The mineral rights aspect could definitely impact your tax situation! If the mining company is interested primarily in the mineral rights, you might want to consider selling just the mineral rights while retaining ownership of the surface land. This might qualify for different tax treatment. Also, if you sell mineral rights, you might be able to treat the income as a royalty arrangement over time rather than a lump sum capital gain, which could be more tax advantageous depending on your situation. I'd strongly recommend consulting with a tax professional who specializes in mineral rights before accepting any offer. This kind of specialized property often has very specific tax implications that a general tax preparer might miss.

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