Home sale out of state

[cheesmo]

I bought a house in North Carolina about 5 years ago and paid $130,000 plus I put another $20,000 into it. I had me and my son listed on the deed as 50-50 owners. I live in California. Now the house is being sold for $230,000. What are the capital gains ramifications? If I receive my half I would get say $110k after expenses. I could have a capital loss but Is there a tax consequence of giving my son half the interest in the house, is that considered a gift which is taxable?

[Coleen3 · Accepted solution]

$230k minus $150k equals an $80k gain apart from expenses. You will have to file a Form 709 for the amount of the gift but there is no actual tax to be paid due to the high limit of the estate tax.

Form 709 

The purpose of IRS Form 709 is to report gifts that are subject to gift and generation-skipping transfer taxes. 

The most common rule is the annual exclusion, whereby anyone can give up to $14,000 in cash or property to a person without having a taxable gift. This is the provision that prevents most ordinary holiday or birthday gifts from being taxable. 

Even if you have made a taxable gift, Form 709 isn't as big of a burden as many think. That's because unless you've made a huge gift, you won't have to pay any actual gift tax.

The U.S. has a unified gift and estate tax system at the federal level. Everyone has a lifetime exemption from gift and estate tax -- $5.49 million for 2017 -- and even after you use up your $14,000 annual exclusion, any remaining gift amount applies against your lifetime exemption amount.

https://www.fool.com/retirement/2016/11/11/2017-estate-tax-rates.aspx