We had a 2nd home that a family was living in. We did not charge rent. We sold it at a value over what we purchased it, however gifted the full allowable amount of equity. Because of the gift of equity, the amount we received was less than what we purchased the home for. What do I need to report and how do I do it?
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Unfortunately, the IRS does not allow a capital loss on the sale of personal use property. This rule applies to the sale of a vacation/second home that was a personal use property.
However, if you actually had a gain on the sale but gifted a portion of the equity, you would still have to report the capital gain on the sale before the gift and pay taxes on any capital gain. The gift may require a separate tax return filing on Form 709. (If this gift was to a charitable donation to a registered charity, you may be allowed a Schedule A donation deduction)
Click this link for further information about reporting the sale of a capital asset
Alternatively, To enter this transaction in TurboTax Online or Desktop, please follow these steps:
The fact that you gifted a portion of the equity in this transaction may require you to file a separate gift tax return (Form 709). Here is a link for more information about the filing requirements for a gift tax return:
https://www.irs.gov/instructions/i709/ch01.html
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