Gifted Second Home Sale

[seok1452]

My parent purchased a condo in March 2009. They gifted the condo to me in Oct 2010. I sold the condo in Sep 2016. I do not have information about my parent's/donor's purchasing agreement. I think they purchased it at $270,000 but do not have other cost information. I have their "gift tax return". The gift tax return shows Donor's adjusted basis of gift is $350,000.

1. On my 2016 return, what is donor's cost basis? $350,000?

2. On the final settlement, I added back mortgage balance repayment and state tax withholding to the net proceed(the amount I actually received? What typical items should I add back to get net proceed amount to calculate gain/loss ?

3. Turbo Tax shows I have short term gain. Why? I have been holding longer than one year.

4. Can loss from sale of second home be carry forward/back?

[Fern · Accepted solution]

Your cost basis is $350,000.or the Fair Market Value at the gift date - whichever is lower.

The sales price minus the cost to sell the property is what you should be used to calculate the gain. Closing costs (title fees, real estate commissions, documentary stamps, credit report costs, costs of an abstract, transfer taxes, home inspection, flood certificate, attorney fees, etc.), reduce the sales price of the property. These expenses are not deductible on your return. They can only be used to reduce the selling price.

Make sure you have the date you acquired the home entered correctly. It should be considered a long term capital gain.

If the home was only used for personal purposes (not a rental), you cannot deduct the loss on the sale. You cannot take a deduction for the loss on personal use property,

[seok1452]

Thanks a lot for your help. A quick question, I sold it for 425k in gross so I will have some gain. Is my cost bas is still 350k or FMV whichever is lower???

[Fern]

Yes. Don't know what your parents based the gift value on - it should be FMV, because they had to pay a gift tax on the amount. There would be no benefit to them for over-stating the value.