Deductions & credits

You will have a taxable capital gains if you sell for more than your cost basis. It doesn't matter what you do with the proceeds.  Because you have owned the home less than one year, the gain is a short-term capital gain which is taxed at your regular income tax rate, which may be 15%, 25%, or higher. You also owe some kind of state income tax or state capital gains tax depending on your state. 

 Since this was a gift of some kind, your cost basis is the cost basis of the person who gave you the home.  Their cost basis is the cost that they paid to build it or buy it, plus the cost of any permanent improvements that were made while they owned it. 

 You will need to contact the donor to have them tell you what their cost basis was and provide proof for you. If the donor purchased this home, the purchase records are probably at the county clerk's office.  If the donor built the home, the cost basis is the money they actually paid for materials and contractors.  There are no adjustments for free labor, either yours or anyone else's. 

 Be aware that if you are audited, the IRS does not have to give you any cost basis that you can't prove. If you can't prove any cost basis, then the IRS may assign a zero cost basis making all of the sales price taxable income. So you will need to be diligent in finding proof of the donor's cost basis.

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