I sold an income property
So what you're saying is that you sold rental property.
I purchased the property for 86k and sold it for 85k.
So after taking depreciation into account, you still sold at a gain most likely. In the year of sale you are required to recapture all depreciation taken and pay taxes on it in that year. So you *do* have a gain and you *will* pay taxes on that gain. If you failed to depreciate the property while it was classified as a rental, that doesn't matter. You are still required to reduce your cost basis by the amount of depreciation you "should" have taken, and you will still be taxed on the recapture amount.
If i endorse the check to my daughter, will I still get taxed for the extra income?
Yes, you will. What you do with the gains from the sale does not matter. *YOU* still pay taxes on it. The gift amount you give to your daughter is not reported on any tax return, ever, provided the amount of the gift given in any one tax year is less than $15K. Bottom line is, you are the one who pays taxes on it.
