My husband and I purchased a home for my parents to live in 10 years ago. They lived in House #1 for 5 years then moved to House #2. We took the net proceeds from House #1 into House #2. House #2 was co-owned between me and my mother for 4 years. House #2 was sold and she moved into a new home (House #3) that she and her husband jointly owned. Our original agreement was that all proceeds from the home(s) were to belong to me and my husband. This has not been an issue.
My confusion is coming in on Capital Gains taxes.
When we sold House #1, I paid Capital Gains taxes on the net proceeds (sales price - capital improvements - original purchase price). As mentioned before, the remaining amount was put into House #2.
When House #2 was sold, the proceeds were split between me and Mom so that she could take $75,000 to use toward the down payment of House #3 (which I had no ownership in). So, basically a 'loan'. I paid capital gains on my portion of the proceeds from the sale of House #2.
Now, House #3 has been sold and the $75,000 I 'loaned' Mom has come back to me.
A couple of questions --
1. Do I owe Capital Gains on this $75,000? And if so, how do I report it? Our names were added to the security deed via a QCD after the purchase of House #3. Do I just report it like I had the other two homes? Like the sale of an investment property.
2. I'm not sure if this plays into the calculations of Capital Gains at all, but does any cash we put into the properties (House #1 and House #2 such as down payment and loan paydown) get subtracted from the amount of Gain we realized? Or is that already calculated in the numbers and I'm not realizing it.
Hope this isn't too confusing. Help!!!
