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PA-Parent
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How to calculate capital gains on a home given to children 20 years ago and recently sold due to Mother needing to vacate the home.

proceeds of home sake was only 18,000 due to split between siblings

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3 Replies
jtax
Level 10

How to calculate capital gains on a home given to children 20 years ago and recently sold due to Mother needing to vacate the home.

First off, that the house is split among multiple owners does not matter. Each owner has to report their % of sale proceeds minus their % of basis.

The basis of a gift is generally the donor's basis. If your mother gave her house outright to her kids 20 years ago, that would be her cost plus any improvements. If she stayed on the deed as an owner that might change things.

However, if your father co-owned the house and passed away before the transfer to the kids, then the basis for the part of the house he owned (typically 50%) would generally be the fair-market value on the date of his death.

If the house was purchased before 1997 and your father provided the money for the purchase (e.g. your mom didn't work), it is possible that the step-up at the date of his death would be 100% per the Gallenstein case.

So you calculate you basis as your % of your mother's basis as of the date of transfer plus any improvements made thereafter. Do you have the closing documents for when your mother bought the house? That's where I would start. If the step-up applies for your father, you might speak to local appraiser and see if you can get an appraisal as of that date.

This is complicated and you may be better off seeking the advice of a CPA, Enrolled Agent (EA), or tax attorney.

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How to calculate capital gains on a home given to children 20 years ago and recently sold due to Mother needing to vacate the home.

I get the impression the mother continued to live there, so it could be a Life Estate situation (either stated or implied), in which case the mother would have retained some ownership (based on the actuarial tables).  An Estate attorney may be a good idea.
jtax
Level 10

How to calculate capital gains on a home given to children 20 years ago and recently sold due to Mother needing to vacate the home.

Yes it is a very good idea to get professional assistance on this. I think the life-estate will probably only matter for estate tax issues and medicare eligibility. But that might not be true.
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