Parents deeded home (1966) in GA to me/brother in 08 but lived there til death in May 22. Not a life estate. No appraisal in 08. What is basis? We made improvements.

Forum|Forum|3 years ago
August 23, 2022
10 replies
29 views

Parents bought house for $13,500 in 66 and we just sold house in July 22 for $118,000. Made $25K in improvements since 08. Without life estate afraid can't step up basis to 08. What about gifting property? In 08 gift amount was $12K per person for property. We split proceeds from sale. House was paid for. We helped with or paid for improvements over years. Doesn't seem fair to pay capital gains tax on gross proceeds $107,500.

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Mike9241

Level 15

the initial basis to the donees for a gift that is sold at a gain is the donors basis at the date of the gift (that would be the $13.5K plus any improvements from the date they bought it to the date of the gift). To that you can add the cost of improvements made since the gift. from the gross sales price, you can deduct the costs of sale which would include but are not limited to transfer taxes, sales commissions, warranty deed, and certain credits given to the buyers at closing for things like their closing costs.

Mike9241

NCperson

Level 15

@actcjones you are close.....

$113,500 less

1) the $25,000 in improvements you and your brother made less

2) the selling costs (e.g. sales commission) less

3) any improvments your parents made prior to gifting to you.

The remainder is the gain.

Hal_Al

Level 15

A life estate does not have to be explicitly established in the deed. Your parent probably had an "implied life estate", if they lived there til death. If so, that would give you the stepped up basis. There is case law on this. Check with a good lawyer

actcjonesAuthor

Level 2

My mistake. The net would be $104,500. I would like to think the implied life estate would apply by default since they lived there. The stepped up basis (at death) would be what we sold it for 90 days after my dad passed which would mean no capital gain. The other opinions here seem to subtract any and all improvements from gross profits and the net would face capital gains. At least a step up in basis to 2008 (vice 1966 original purchase) would help but that doesn't seem to apply either. Wish this was more clear in tax code. To make matters worse it wouldn't surprise me if parents failed to list house as a gift on their 2008 tax returns. Don't know how that impacts.