My wife and brothers inherited real estate a number of years ago. They were kept an managed by of of the brothers. They are now being sold and each sibling will take their portion and purchase other investments/real estate in a 1031 exchange. What is the ma’aser obligation that will take effect as a result of the sale? Does it take effect only on cash that is pocketed ( if any) or on the full value of the inheritance ( after closing costs)? Or is it delayed ( like the tax obligation) until the new investments are cashed out?
Obviously ma’aser is paid on the profits, both past and BEH in the future.
Thank you for your time,
Thank you for your question.
The obligation to give maaser applies to the value of the real estate, however when it was still an object and not turned into cash, you didn’t yet have to give it. Now that the real estate is sold, so the value that your inherited has to be “maasered”. Having said that, the rule with giving maaser is that we only have to give maaser from the original principle at the beginning, however monies that are earned from investments of that money are only given when the profit is realized. Therefore, if you are taking the investment profit and reinvesting it into something else, you do not have to take off maaser from those profits until you actually take the profits for yourself.
Therefore, let’s say the real estate was worth $1m at time that you inherited it, and it will be divided into four parts. Therefore $250k is what needs to be “maasered”, which would be 25k. Since the real estate was not sold right away, if the value of the property went up to $1.4m, and you gained 100k in value, the extra 10k of maser does not have do be given now, since you are selling it in order to reinvest it. Therefore, although you should give the 25k now, the other 10k doesn’t have to be given now. Needless to say, when that property is sold, you will include calculate the profit of that sale as if you made and extra 100k, because his is what you made for the appreciation of the first property, which you have still not given maaser.