I received a house via quitclaim deed as a gift from mom. Lived there 10+ years. Bought new house and rented old one for 2+ years now. Must I sell to avoid capital gains?

yellowbugger62 — Thu, 31 Oct 2019 00:21:37 GMT

Re: I received a house via quitclaim deed as a gift from mom. Lived there 10+ years. Bought new house and rented old one for 2+ years now. Must I sell to avoid capital gains?

Critter — Thu, 31 Oct 2019 00:57:52 GMT

First cap gains is not a bad thing to be avoided ... so if the rental is working well you can just keep the home.

However if you want to use the personal residence exclusion you have to live in the home for 2 of the last 5 years prior to the sale.

You will have to recapture the depreciation taken or allowed as ordinary income even if the cap gain can be excluded ... review all your options before you do anything rash.

Re: I received a house via quitclaim deed as a gift from mom. Lived there 10+ years. Bought new house and rented old one for 2+ years now. Must I sell to avoid capital gains?

Carl — Thu, 31 Oct 2019 13:49:24 GMT

I received a house via quitclaim deed as a gift from mom. Lived there 10+ years.

So I assume the above house was your primary residence from 2007 to 2017. Hopefully you are aware that when mom gifted you the house, you were also gifted her original cost basis in the house. This is IMPORTANT you know this, since you converted it to a rental in 2017. Therefore if your mom originally purchased the house in 1980 for say, $35,000, what it's fair market value (FMV) was when she gifted it to you doesn't matter. When you converted it to rental the depreciation you are required to take by law is based on the lesser of what you paid for it, or it's FMV at the time of conversion. So in your case since it was a gift, the value depreciation is based on, is whatever your mom paid for the house, plus the cost of any property improvements incurred since she purchased it.

Bought new house and rented old one for 2+ years now.

By "rented old one" I assume you're referring to the house mom gifted you.

Must I sell to avoid capital gains?

Capital gains is not always a bad thing. If the house is in descent shape and you have good tenants, and it's producing a positive cash flow, keep it. Especially if there is no mortgage on the house. Is there a mortgage? For me, if there was no mortgage on the house then I don't care about capital gains. I'm gonna keep the property and do my best to keep it rented for as much rent as I can get, for as long as I can get it. I say that from personal experience because of the three rental properties I own, one of them is paid off and the cash flow more than exceeds any capital gains I will pay when I sell. Remember, capital gains is capped at a maximum of 25%. After putting a bit aside each month for property taxes and insurance, that paid off rental property produces $1150 cash flow every month for me. I don't give a damn about capital gains when I sell. As it stands now, I have no intention of selling it though.

topic I received a house via quitclaim deed as a gift from mom. Lived there 10+ years. Bought new house and rented old one for 2+ years now. Must I sell to avoid capital gains? in Investors & landlords

I received a house via quitclaim deed as a gift from mom. Lived there 10+ years. Bought new house and rented old one for 2+ years now. Must I sell to avoid capital gains?

Re: I received a house via quitclaim deed as a gift from mom. Lived there 10+ years. Bought new house and rented old one for 2+ years now. Must I sell to avoid capital gains?

Re: I received a house via quitclaim deed as a gift from mom. Lived there 10+ years. Bought new house and rented old one for 2+ years now. Must I sell to avoid capital gains?

I received a house via quitclaim deed as a gift from mom. Lived there 10+ years.

Bought new house and rented old one for 2+ years now.

By "rented old one" I assume you're referring to the house mom gifted you.

Must I sell to avoid capital gains?