I may be about to inherit a farm that is located in another state? This is through my grandparents estate. Can you tell me what questions I need to be considering and what potential tax issues that may arise? This farm will be divided among the 3 grandchildren. Our agreement is that we would like to keep the farm and rent it out, not sell it at this time. The farm is located in Iowa and I currently live in Wisconsin.
1 Answer from Attorneys
When you inherit the farm, you will usually do so after all the costs associated with the transfer have been paid out of your grandparents' estates. Thereafter, you will have to pay real estate taxes on the farm. It would also be a good idea to assure you have some liability insurance coverage, in case someone gets hurt on the farm. Contact an insurance agent for that.
Since the rental income will come from real estate located in Iowa, it would generally be taxed in Iowa. It would also be taxed in Wisconsin, but you would be given a credit for the Iowa tax paid, with Wisconsin then only collecting the difference, if Wisconsin is more than Iowa.
You will have a basis in the farm based on what value it had in the estate. You should be sure to get that information from the attorney handling the estate, because it will come in handy if you sell some day. If there is a home and buildings also involved, and if they are also rented out, there would be depreciation to consider.
As you look at this, you can see there are quite a few pieces to have to take into account. You may want to be sure you have a good accountant and attorney to be sure all your interests are considered and that you are fully protected.