Approximately 1980, my parents deeded our home to me with a life estate for themselves. Upon father's death, 2001 the house was mine. Valued at about 90k then, I sold it at 63k early this year/2007. The estate was not large enough to pay any taxes and I am a direct heir if that is relevant. Where does this fit in federal income taxes? A quick websearch was not assuring and I have never received IRS answers that matched. Thanks for any self-help direction you can provide. I do my own taxes.
2007-12-24 18:47:01 · 4 answers · asked by Joseph B 2 in Business & Finance ➔ Taxes ➔ United States
Parents built house for 9k in 1957, added 9k addition 1978. Built detached garage in 1963 for about $4k and I added a 8k kennel and fence. Sat on about 7 acres father bought from grandparents for $1 and affection as that was the way things were done. My position is house/land was worth 90k and I lost money on its sale. Still do I file a capital gains(loss) or sale of home (bought home in new state)? Will Turbo tax be able to clarify?
2007-12-25 06:02:12 · update #1
Spicertax-I lived in house from 2001-2005 when I married and moved out of state. As I read I qualify for the situation that this was my residence. Actually, this was my permanent residence since birth! I also had a temporary apartment when I went to grad school but maintained the residence until marriage. I bought a new (ha-100 years old) house. I think this situation was sale of home with loss. I will call IRS but already know they often give noncommittal answer.
2007-12-26 08:30:26 · update #2
You owe nothing. The gift in 1980 would have meant they needed to file a gift tax return if it was over 10K each.
If they had left it to you at death you would have had a stepped up basis so inherited 90K worth of house and when you sold at a loss you would have not been able to deduct it.
Don't worry about the gift tax since they had to file it but wouldn't have owed any tax is it was part of a 1 million lifetime excusion.
2007-12-24 18:50:14 · answer #1 · answered by shipwreck 7 · 0⤊ 4⤋
Since they kept a life estate you do get the cost basis stepped up to their death value of 90K. Since you sold it for 63K if you did not live there it was a capital asset and the loss of 27K is allowed on Schedule D. If you lived there the loss on a personal residence is not deductible. A big difference that depends upon whether you lived there.
2007-12-26 12:25:52 · answer #2 · answered by spicertax 5 · 0⤊ 0⤋
That would depend upon your parents' basis in the home. Since they deeded it to you as a gift back in 1980 you do not get the stepped up basis upon their death but their original pass-through basis. If their basis was less than the $63k you will owe capital gains tax on the difference between the adjusted basis and the net proceeds from the sale.
2007-12-25 06:23:41 · answer #3 · answered by Bostonian In MO 7 · 2⤊ 0⤋
There is a big difference between if the home was gifted to you when your father was alive or you inherited it on his death.
If it was a gift in 1980, then your basis on that date is same as your father's basis.
If you inherited it in 2001, then your basis is the Fair Market Value of the house on the date of your father's death.
Any profit or loss is to be reported on schedule D (Form 1040) as long term capital gain/loss.
2007-12-26 03:40:11 · answer #4 · answered by MukatA 6 · 0⤊ 0⤋