Question

Sale of inherited land in another state

Forum|Forum|2 years ago
April 3, 2024
1 reply
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I inherited a portion of the family farm on the death of my mother. I live in Oklahoma; the land is in Kansas.

The land has now been sold with a small gain. Do I now owe capital gains in KS? If yes, I am assuming that I need to file a return in KS in order to pay capital gains on the sale, correct.

KrisD15

Yes, that is correct.

Please do the Kansas non-resident return first in the TurboTax program.

When you do the Oklahoma resident return, you should get a credit for the tax you pay to Kansas.

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O

okrandyAuthor

Ok. I deleted my OK return and purchased the KS program.

However, when I redo my OK return, it is importing the KS land sale from the federal and including it in the capital gains section of the OK return. How do I delete it?

I can say that it qualifies for an exclusion (i.e. out of state transaction) but is there a cleaner way?

Thank you.

J

JamesG1

Both states have a claim on the income. Oklahoma is your state of residence and has a claim on your income. Kansas has a claim on the sale of real estate within the borders of its state.

You will report the sale of of the property in Kansas on a Kansas nonresident income tax return. Oklahoma has a claim on this income because Oklahoma is your state of residence.

The Oklahoma credit for taxes paid to another state does not apply.

Oklahoma Resident Individual Income Tax Form 511 Instructions, here, page 11 states:

Credit for Tax Paid to Another State

If you receive income for personal services from another state, you must report the full amount of such income on your Oklahoma return. If the other state also taxes the income, a credit is allowed on Form 511.

The gain on the Kansas real estate on the Oklahoma state income tax return does not qualify for the Oklahoma Capital Gain Deduction.

Oklahoma Resident Individual Income Tax Form 511 Instructions, here, page 18 states:

Oklahoma Capital Gain Deduction

You can deduct qualifying gains receiving capital treatment that are included in Federal AGI. “Qualifying gains receiving capital treatment” means the amount of net capital gains, as defined under IRC Section 1222(11). The qualifying gain must:

1) Be earned on real or tangible personal property located within Oklahoma that you have owned for at least five uninterrupted years prior to the date of the sale.

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