Sale of home

[Aec1945]

Bought duplex 1993 for $126,000 to live in one side and for parents to live in other side. Parents gave $50,000 to live for rest of their lives.  Duplex in my name only and I paid all taxes and insurance.  Parents paid own utilities.  Mother died 2024 so sold duplex for $300,000. Bought condo for $169,900. Was my residences all 31 years Do I owe any taxes?

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[marctu]

Well this is an interesting question about a duplex and the Section 121 exclusion.   The condo being purchased for $169K is not a necessary part of this analysis.  

The Section 121 exclusion would clearly apply to (assuming the duplex is 50/50%) to your half of the duplex, since it was your primary residence for at least two of the last five years.   

So the use of the word give is interesting.  It is not purchase and it is not gift.   I probably would have structured this differently, but 1993 is a long time ago, so let it be at this time.

This was not an investment property though, so it would be considered a second home and would be be subject to capital gains tax.   

So to add to your fact pattern, over this 31 year period,  I am assuming you have made at least one capital improvement during this time to both parts of the duplex.  Publication 523 should be looked at.  Specifically page 10.  See an excerpt:

Additions

Bedroom, Bathroom, Deck, Garage, Porch, Patio

So what you paid for the part of the duplex you did not live in $53K  is not your adjusted cost basis.   Your adjusted cost basis would include all the improvement that you have made over your long-term home ownership.  

Also remember that the costs of the purchase are additions to the $53K you paid for the part of the duplex you did not live in.   You also have closing costs on the purchase that are either adjustments to basis or costs of the sale.  

I would carefully go over 31 years of records and the closing statements in calculating what the tentative gain is on the part of the duplex you did not live in.  

The Long-term capital gains tax rates for the 2024 tax year are as follows:

FILING STATUS	0% RATE	15% RATE	20% RATE
Source: Internal Revenue Service
Single	Up to $47,025	$47,026 – $518,900	Over $518,900
Married filing jointly	Up to $94,050	$94,051 – $583,750	Over $583,750
Married filing separately	Up to $47,025	$47,026 – $291,850	Over $291,850
Head of household	Up to $63,000	$63,001 – $551,350	Over $551,350

In addition, those capital gains may be subject to the Net Investment Tax, an additional levy of 3.8 percent if the taxpayer’s income is above certain amounts. The income threshold depends on the filer’s status.

(individual, married filing jointly, etc.) and are not adjusted for inflation.

The IRS statutory income thresholds are as follows (Based upon Modified Adjusted Gross Income):

• Married filing jointly — $250,000
• Married filing separately — $125,000
• Single or head of household — $200,000
• Qualifying widow(er) — $250,000

Thanks again for the question @Aec1945    

All the best,

Marc 

Employee Tax Expert