My father gifted his house to my 2 sisters and I 2-1/2 years ago.?

Question

My father passed away and we have sold the house. Do we have to pay capitol gains and what percentage. The house was valued at 200,000.00 when he gave it to us and we have sold it for 300,000.00.

Answer 1

Sorry for your loss.

In the tax situation, the gifting of the house probably wasn't a smart move tax wise. If your Father had allowed the house to pass to you and your sisters through an inheritance, your basis in the house would have been the value at the date of his death. However, since the house was gifted to you and your sisters, your basis in the house is the same as was your Fathers, which is the amount he paid for it plus any improvements, not what it was worth the day of the gift. For example, if he paid $75,000 for the house 35 years ago, gifted it to you 2-1/2 years ago when it was worth $200,000 and you sold the house for $300,000, then your gain will be $225,000 ($300,000 - $75,000). You and your sister will be paying LONG-TERM capital gains taxes on the gain and that will most likely be at 15%.

Good luck,

Answer 2

What was the value of the house when your father acquired it? Add to this value any improvements (such as a new room, new roof, major remodel).

Say his basis was $30,000. The gain on the sale of the house is $270,000. Each of the three owners has a $90,000 capital gain, and each will pay a maximum of $13,500 in tax on the gain (which is 15%).

There are a couple of situations that would lessen the tax burden. First, who lived in the house for the past 2.5 years? If one or more of the three owners lived in the house, then those owners will be able to exclude their entire gain since it was their principal residence.

The second possibility is if the deed on the house was a transfer on death type of deed. Then you in fact would have inherited the house, and there would be no tax due if the value of the house at the time you inherited it was the same as the selling price.

Answer 3

If you had inherited it, then your basis would have been the basis at the time of your dad's death. But since he gifted it to you, you take on his basis, which is what he paid for it plus any improvements. Its value when he gave it to you has nothing to do with anything.

Answer 4

Sorry for your loss.

"Gifts" are valued at giver's cost plus any improvements made. You will taxed on the difference between the sale price ($300k) and whatever your dad paid for the property plus improvements.