Taxes owed on sale of property?

Question

My father quit claimed his house to his 5 children in Fall 2005. He was in a nursing home and the house was never lived in again. We sold the house in Dec 2006 and split proceeds between all 5 children. What tax liabilities are each child responsible for? Originally the house was in his will and to be inherited upon his death. Any help will be greatly appreciated.

My parents paid $17,000.00 for the house in 1975. The house was sold for $74,900.00 minus settlement charges, seller paid consessions and taxes totaling $9366.20. My parents never had an assessment done on their house while still living. The only assessment that was done was when we listed it for sale. I have been told that we will owe taxes on the difference of the original 1975 purchase price and the 2006 selling price. I do have a list of improvements that were made through the years (not all have receipts), however, they do not total the difference of 1975 original purchase price and 2006 selling price.

Answer 1

Jo Stands corrected,, Mark S. is correct. When I saw the word "inherited" in your question I locked on to that. If you had inherited the house the cost basis would be the value of the house the day you inherited it. BUT, since it was gifted to you, the cost basis , as Mark S points out, is the cost basis your father had in the house the day he gifted it. (thanks Mark)

To arrive at his cost basis you would take the original cost of the house and add any additions such as an extra room,, central heat and air, a fireplace, chainlink fence, etc. Repairs such as replacing a broken window or replacing a water heater is not adding to the cost basis, it's just a repair.

I'll include link to IRS page with info on the subject.

So, figure the cost basis your father had in the house and you take 1/5th of that as your cost.

You report the sale on Schedule D as long term sale. the description of property is 1/5 house,
the dated purchased is the day your father gave it to you, you know the day you sold it, your cost is 1/5 of total cost basis, your selling price is the amount you received after all commissions and fees \.

Answer 2

Mark S is right. The adjusted cost is the original purchase price plus the cost of improvements (not maintenance). I would make a good faith estimate for any improvements for which you have no receipts. For example, if central air conditioning were added, I would at least try to find out what that size/brand air conditioner sold for in the year it was installed.

Answer 3

Jo Blo's answer is correct however the basis of a gift is the basis of the person that made the gift. In this case 1/5 of his adjsuted cost.