Re: inheriting land
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I'm no CPA, but I was under the impression that the gift or inheritance is not income to the recipient and therefore tax free, but the 'giver' will pay a gift or estate tax, which have indivdual exemptions of 2 million, above that yes, its pretty harsh, like 50%. Wait until 2010, then the gift estate tax goes to zero.
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Some of this true, but not all.
We'll have to make some assumptions to understand the tax implications. First, we'll you receive the $1.4 million all at once. Next, we'll assume that the $1.4 million is split equally between you and your wife ($700,000 each). Finally, we'll assume the donor has not made any previous gifts.
There is an annual exclusion of $12,000 per donee (in 2007). So, the taxable gift for the donor to each of you will be:
700,000
(12,000)
=688,000 (for each of you)
Therefore, the tax (paid by the donor) for each of you would be 155,800+.37*(688,000-500,000) = $225,360 for a total of
225,360 x 2 = $450,720 tax due. However, there is a unified tax credit of $345,800. This should lower the tax liability to $104,920, for an effective tax rate of (104,920/1,400,000) = 7.5%.
Now, the details of your facts were not clear - if this is a grandmother giving the gift and it involves skipping a generation (i.e. she gives the gift to you instead of your parents), the Generation Skipping Transfer Tax (GSTT) may apply. I won't go into the detail, but this tax treats the gift almost as if it was given to you through the grandmother's estate rather than a regular transfer. Also, the amount of the tax paid by the grandmother would represent an additional gift to you, on which a gift tax would need to be paid.
Short answer: You'll need to wait and see what your CPA says when he/she has all of the facts, but the one thing I can say for sure is that, assuming there are no prior gifts given by your grandmother in-law, the tax should be minimal (i.e. much less than 50%).
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