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Discussion:Gain on Sale of Transferred Home

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Discussion Forum Index --> Basic Tax Questions --> Gain on Sale of Transferred Home


Discussion Forum Index --> Tax Questions --> Gain on Sale of Transferred Home

Sgklein (talk|edits) said:

October 12, 2009
I have a client that is selling a home shortly.

Background: This was her parents home (titled to both). Her father died in 1999. In 2000, her mother "sold" the property to her daughter (my client)for $1, and her mother has been living in and maintaining and paying all expenses for the home up to this point.

I want to say that the daughter will have to recognize a Capital Gain on the sale of this home, should it sell for a profit, that is. I am assuming that the basis is: one half of the FMV of the home at the date of her father's death (which would transfer to the spouse) and one half of the actual cost basis of the home (purchase price + improvements) at the time of transfer to the daughter.

So if the cost basis was 50K and the FMV was 100K, then the costs basis to the daughter would be 75K.

If the house sells for $100K, the daughter would recognize a Capital gain of $25K...but if it sold for less than $75K, than no loss would be recognized as this is a related party loss?

Kevinh5 (talk|edits) said:

12 October 2009
is mother alive or dead?

Kevinh5 (talk|edits) said:

12 October 2009
is the daughter selling to a related party?

Sgklein (talk|edits) said:

October 12, 2009
Mother is still alive. Selling property to unrelated party.

Kevinh5 (talk|edits) said:

12 October 2009
if daughter sells to an unrelated party for less than 75K in your example, the loss would be recognized. The gift rules apply here (some would argue part sale/part gift but I don't give $1 much consideration as consideration).

Dennis (talk|edits) said:

12 October 2009
Could be a full step up if Mother didn't work and house was purchased prior to 1976 (Gallenstein). Mother has an implied retained life estate (which qualifies for exclusion). Gift tax return required somewhere along the line here.

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