I understand for federal capital gains tax on the sale of inherited property that the basis is based on the FMV of the property within 30 days of my father’s death in 2004. Therefore the gain is the difference of the basis vs. the sale price.

I am a resident of Colorado and I have property in Georgia that is being purchased by the county water authority for a regional reservoir.

The State of Georgia Department of Revenue (GA-DOR) O.C.G.A. Section 48-7-128 requires 3% of the total sales price to be paid to the GA-DOR, unless I supply an affidavit (Form IT-AFF2) to the buyer, swearing to the cost basis, then only 3% of the gain is paid to GA-DOR.

Do I figure my cost basis according to the IRS rules for inherited property sales?

I have searched extensively for specific wording in the GA Dept of revenue code and I have not found anything that refers to basis of inherited property.

Sorry for the long explanation. Any help will be greatly appreciated.

Yes, get an appraisal that states the FMV at the time of your father's death. Then submit that to the DOR.

Thanks. That is my plan. Do all states follow IRS guidelines so that the basis is assumed to be the FMV at the time of my fathers death?

Yes.

Thanks Scott. My initial understanding when I researched the paragraph in my contract about the Georgia withholding was that 3% of the gain which is way less than 3% of the total sales price was a no brainer until I couldn't find anything about inherited property in the tax section quoted in my sales contract.