I won a home on a TV show. The home and its contents were appraised at $194,000.00. We were told we would have to pay State and Federal income tax on the home.
My husband and I moved into the home and have lived in it for 4 months. My husband has to commute 3 hours round trip daily for work so the home just isn't working out for usand we have decided to sell it. Our agent recommended we list it at $179,900.00 to be competitive with other new homes in the area.
I was told I will have to pay Capital Gains Tax on the home since we have lived in it less than two years. Is this true? If so, how will it be taxed? What would be considered the profit of the home?
Kindly,
JW
First, I'd be somewhat suspicious of the "appraised" amount if it didn't come from a bona-fide appraiser in a written, signed report. Prize givers are notorious for over-stating the value of prizes in order to attract attention to their contest/game show/fund raiser/etc. But, yes, you do have to pay income taxes of the fair value of whatever it is you won.
I don't know that you do have a capital gain to report. It's not uncommon, depending on where you live, that homes sell for less than their initial asking price, and in any case you're not going to get the full amount of whatever the house sells for. The realtor will probably get 6% of that asking price and you'll have other costs that will chip away at your net proceeds. Too, I have no idea how much of that $194,000 is properly allocated to the furnishings and contents that you won, which I assume you are not selling.
You may have a loss when all is said and done. A loss on a principal residence is not deductible but the gain, if any, will be taxable on your 2017 income tax return.
Tom Young
Hve you made any Federal or State estimated tax payments for this?
First, I'd be somewhat suspicious of the "appraised" amount if it didn't come from a bona-fide appraiser in a written, signed report. Prize givers are notorious for over-stating the value of prizes in order to attract attention to their contest/game show/fund raiser/etc. But, yes, you do have to pay income taxes of the fair value of whatever it is you won.
I don't know that you do have a capital gain to report. It's not uncommon, depending on where you live, that homes sell for less than their initial asking price, and in any case you're not going to get the full amount of whatever the house sells for. The realtor will probably get 6% of that asking price and you'll have other costs that will chip away at your net proceeds. Too, I have no idea how much of that $194,000 is properly allocated to the furnishings and contents that you won, which I assume you are not selling.
You may have a loss when all is said and done. A loss on a principal residence is not deductible but the gain, if any, will be taxable on your 2017 income tax return.
Tom Young
If you won the house this year, then the value of the house is taxable as income this year. If you sell the house for $!79,900, you would pay income tax on that less any costs involved in selling it, and argue with the IRS that this was the true value of the house when your acquired it. The problem is if the TV show might give you a 1099 with a value of $194,000, but you could probably argue that this did not reflect true market value. If you do not sell the house, you would have to either accept the TV shows value, or have it appraised by a licensed real estate appraiser. Once you establish the value (or cost basis), then capital gains would then accrue from that value. You would have to live in the house at least two years to have any tax free capital gains.