The gains must be reported. The basis will be deducted from the sales price, so you won't pay tax on the ''gift'', but you must report the capital gain or loss, even if it is $1 assuming you are already required to file a tax return. TurboTax will calculate the gain based on the sales price and the basis. The basis of gifted property is the donor's adjusted basis.
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When you sell a capital asset, the difference between its cost basis and the selling price results in a capital gain or loss.
- A capital gain is when your asset's sales price exceeds its cost basis (in other words, you made money). Capital gains must be reported on your tax return.
- A capital loss is when you sell the asset for less than its cost basis. Capital losses from investments can be deducted, but not those from personal-use assets, such as your home or personal vehicle.
Your total capital gains for the year minus your total capital losses results in either a net capital gain or a net capital loss.
- Short term capital gains (gains on assets held one year or less) are taxed as ordinary income.
- Long term capital gains (gains on assets held more than one year) are taxed at a more favorable rate than ordinary income.
- Net losses are deductible, but only up to a maximum of $3,000 ($1,500 if married filing separately). Any capital losses you couldn't deduct this year can be carried forward and deducted on future tax returns. This is called a capital loss carryover.
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