[thebenchman]

my mother is now in a nursing home. We have to sell her farm(crops/land) and her home to pay for her nursing care. The farm was inherited 30 years ago and has increased in value. As for the home it was her home for 40 years. So because of the GAIN in the value will we have to pay her poperty gains taxes on these?

ALL of the funds will need to go toward her care.

[ebaines]

First, your mother would be the one paying any capital gains taxes, not you.

It sounds like the home was her principle residence for at least 2 of the previous 5 years, so she should qualify for an exclusion of capital gain on the sale of her home up to $250K. Her cost basis is equal to the fair market value of the property when she inherited it plus the cost of any capital improvements she may have made to the property over the years. If the gain is over the $250K exclusion, she reports the sale on Schedule D as a capital gain. If the gain is less than $250K there is nothing to report. Details here: Publication 523 (2009), Selling Your Home

If the farm was treated as a business concern it gets more complicated, as she would have been depreciating the value of the buildings and equipment. If so, then you really need to sit down with a tax expert to make sure it's handled properly.

[thebenchman]

thanks for the response. The house was the primary and so that is all good.

on the farm she inherited it 25 acres from her dad in 1974 when he passed away. So it is only used for farming of crops. No buliding machinery etc. it is only land. So we do have to sell it to pay for her health care in the nursing home. Since 1974 I know the value of the land did increase. So when we sell this there will be again because a) she didn't pay for it b) just normal costs. So because it is going to pay for her health care and it was inherited, will that be considered capital gains and it will have to be taxed?

[AtlantaTaxExpert]

Yes, the farm is NOT art of the primary home exemption, so capital gains tax would need to be paid.

However, I suspect that her capital gains rate will be 5%, and for sure no more than 15%.