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laceymontano
New Member

I was gifted a house from mother she bought for $95,00 then sold it for $85,000. Do I pay taxes on the money I received?

 
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Anita01
New Member

I was gifted a house from mother she bought for $95,00 then sold it for $85,000. Do I pay taxes on the money I received?

No, you don't pay tax on the money you received.  If you have a gain, you pay tax on the gain; if you have a loss, you may be able to deduct the loss against your other income. 

When you sell a gifted asset at a loss, the calculation of gain or loss for tax purposes is actually a little complicated.  

You will need to have a good estimate of the Fair Market Value of the house when your mother gave it to you.  If you sold pretty quickly after receiving it, then FMV at the time of the gift would likely be very close to your selling price.  Otherwise, you might ask the broker who helped you with the sale to give you an estimate on FMV when you received the gift.

Your holding period on the property is the same as the holding period of the person giving you the gift, so if your  mother owned the house more than a year, your holding period is also long-term, or more than a year, regardless of how soon you sold after receiving it.  Any loss you report can be used to reduce your other taxable income, so you do want to report this.

Read the first paragraph below but then move on to the example and substitute your numbers for the numbers in the example and it will become clearer to you.

From IRS Publication 551, pages 8-9:

"Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustment to basis while you held the property (see Adjusted Basis earlier). If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and have a gain, you have neither gain nor loss on the sale or disposition of the property. 

Example. You received an acre of land as a gift. At the time of the gift, the land had an FMV of $8,000. The donor's adjusted basis was $10,000. After you received the land, no events occurred to increase or decrease your basis. If you sell the land for $12,000, you will have a $2,000 gain because you must use the donor's adjusted basis ($10,000) at the time of the gift as your basis to figure gain. If you sell the land for $7,000, you will have a $1,000 loss because you must use the FMV ($8,000) at the time of the gift as your basis to figure a loss. If the sales price is between $8,000 and $10,000, you have neither gain nor loss. For instance, if the sales price was $9,000 and you tried to figure a gain using the donor's adjusted basis ($10,000), you would get a $1,000 loss. If you then tried to figure a loss using the FMV ($8,000), you would get a $1,000 gain."

https://www.irs.gov/pub/irs-pdf/p551.pdf

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