Hello! Okay, wonderful help. I am so grateful to all who replied. I am posting this question to understand one more nuance. Before I begin, I will RECAP based on the replied information to make sure I have understood all that you shared. Is the following correct?
In January 2021 upon the death of their mother, three siblings Peter, Mary, and Joe inherit a home (1/3 each) with a FMV of $450k.
In July 2023, the FMV of the home is $525k.
- Joe would like to gift his share to Mary. $525/3= $175k. Because the FMV $175k is more than $17,000, Joe is required to file IRS Form 709-Gift Tax Return with the IRS.
- Mary pays Peter $125k toward his share of $175k. Peter gifts the remaining $50k of his share to Mary. Because the $50k is more than $17,000, Peter is required to file IRS Form 709-Gift Tax Return with the IRS.
After these transactions in July 2023, Mary's basis is:
- $150k ($450k/3 at time of death)
- $175k Gifted from Joe
- $125k paid to Peter
- $50k gifted by Peter
- $500k TOTAL
Next question. Mary does not live in the house, nor does she rent it out. For each scenario below, what will Mary be obligated to pay for capital gains?
- Mary decides to sell the house in less than a year for $535k.
- Mary decides to sell the house in less than 2 years for $535k.
