2007-03-26 03:18:45 · 5 answers · asked by jim j 1 in Business & Finance ➔ Taxes ➔ United States
You will have no tax consequences until you dispose of the house. At that point, you will have to consider the $55,000 your mother paid for it as your beginning basis, add to that figure the cost of any "capital" improvements you make to the property, deduct out any depreciation (if you ever rent the house out or use it for business purposes), and arrive at your adjusted basis. You will then take your sales price and reduce it by your adjusted basis to arrive at your capital gain on the sale of the property.
If you live in the house as your primary residence, you may be able to defer the gain when you sell.
2007-03-26 04:14:02 · answer #1 · answered by figment_usa 5 · 0⤊ 1⤋
That depends. Did she gift if to you when she passed away? If so you cost is the value of the house on the day she died. If she gifted it to you without having died then your cost is the original $55,000 plus any improvements (new roof, etc) she had put into it over the years, and also any improvements that you paid for for the house. If you had lived in the house the past 2 years out of the last 5 years you would not have to pay any taxes on gains up to $250,000, $500,000 if you were married and both lived in the house.
2007-03-26 12:10:33 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Not possible to say from the information provided.
While some posters have mentioned that your basis is what she paid for it, that needs to be adjusted for any Gift Tax paid. How much of the Gift Tax is used to adjust your basis will depend upon the date the property was transferred to you. The value of the house at the time of the transfer can also be a factor in setting your basis.
If any improvements (but NOT repairs) were made (by her or you) that gets added to the basis. If you or she rented the property out, any depreciation allowed or allowable must be deducted from the basis.
You then subtract your basis from the net proceeds from the sale to determine your gain on the sale.
Whether or not any of the gain is taxable will depend upon factors you haven't mentioned. If you lived in the home as your principal residence for 2 of the 5 years immediately to the sale you may be eligible to exclude some or all of the gain from taxes. The exculsion amount is $250,000 if your filing status is Singe and $500,000 if your filing status is Married Filing Jointly. If you have any gain above the exclusion amount it will be taxed as a long-term capital gain, normally at 15%.
If you do not qualify for the exclusion then the treatment of your gain will depend upon how long you owned the home. If it was for 1 year or less, the gain is taxed as ordinary income at your marginal rate. If you owned it for more than one year, it's taxed at the long-term capital gains rate, usually 15%.
2007-03-26 11:35:23 · answer #3 · answered by Bostonian In MO 7 · 1⤊ 0⤋
As it was a "gift", your basis is what her basis was.
Her basis would have been $55,000 plus any improvements made over the years. You can also add an sales expenses to this such as the brokers commission.
You will be taxed on the difference between the sales price and the basis.
2007-03-26 10:34:58 · answer #4 · answered by Wayne Z 7 · 3⤊ 0⤋
Please check irs.gov on this issue to make absolute sure. My husband and I sold a home he got from his mother. We had made improvements, but with everything, we didn't pay any tax on the sale. We each took the $250,000 capital gains deduction as we both lived in the house and owned it for 2 years. I also called the IRS to make sure I did everything correctly. I
2007-03-26 10:59:45 · answer #5 · answered by OiVey 4 · 0⤊ 1⤋