Gifted Real Property Now Sold

Forum|Forum|5 years ago
December 22, 2020
14 replies
70 views

In 1994 my mother transferred ownership of her home to her three children and removed herself via a quitclaim. She died in 2003 and one child continued to live in the house and was not charged any rent by the other two.

Around 2006, the 1/3 ownership of the child living in the house was purchased by the other two children at the approximate fair market value at the time. That child continued to live in the house without paying rent.

In 2020 the child in the house died, and the two owners sold the house.

Over the years, some improvements were made by the two owners, as well as some in preparation for the sale.

How is the cost basis for this house determined? 1994 or 2006? Fair Market Value or Tax valuation at that time? Besides improvement costs, how is the cost of the 1/3 purchase factored in?

Not A Product Question

Best answer by Anonymous_

@Scorp_930 wrote:
Basically, I need to know where to start in TurboTax to report this transaction?

You can report the transaction in the Stocks, Mutual Funds, Bonds, Other section (under Investment Income) - see screenshot below. Indicate that you did not receive a 1099-B and then select Second home as the asset you sold and proceed through the subsequent screens.

You can also report the transaction in the Sale of Home (gain or loss) section (under Less Common Income).

Anonymous_

Level 15

In what form was ownership of the property being held (e.g., joint tenancy, tenancy in common)?

If you held title as tenants in common, then one-third of the basis for you and your sibling is what you and your sibling paid the third sibling in 2006.

The other two-thirds would generally be a carryover basis from your mother (i.e., your mother's adjusted cost basis) since the 1994 transfer appears to have been a gift. However, if the fair market value at the time of the gift was less than your mother's adjusted basis, then you would use the fair market value on the date of the gift (1994) to figure a loss (which loss would not be deductible since the property was held for personal use).

You would then need to add the cost of any improvements you and your sibling made over the years.

Scorp_930Author

Level 2

Thank you for the response.

I don't know the answer to your first question, but let's assume it is tenants in common.

Using real numbers, the 2006 transaction (actually 2004) was recorded as $24,100, which would be 1/3rd of the then FMV. We each paid the third 50% of that amount at the time for his share. We must have arbitrarily estimated at the time that the FMV was $72,000?

We sold the home in 2020 for $74,000, divided equally between the two of us. From this, it seems like my cost basis is $12,050 (50% of the 2004 transaction) and my sale proceeds (in 2020) are $37,000 (less selling expenses, the net being a little less than $34K)?

I don't understand your comments about the carryover basis for my mother in 1994? I don't know how to determine the FMV for 1994? My memory says she bought the house in 1953 for $12,000.

And, I thought the gift is not taxable to me(us)?

Basically, I need to know where to start in TurboTax to report this transaction?

Hal_Al

Level 15

If the house was bought for $12,000 in 1953, that basis transferred to the 3 siblings in 1994 ($4000 each).

You bought out the third sibling for $24,100 in 2004. Your basis in your half is $4000 + 12, 050 = $16050. Your sibling's basis is the same. You may add the cost any improvements (but not repairs) made over the years.

The gift was not taxable, but Mom's basis transferred to you. She shoulda filed a gift tax return, in 1994, unless each sibling's share value was less than the gift tax exemption amount (that was probably the case).