Long term capital gain calculation on real estate sale

[carlcam]

Hello,

My parents bought their house in Dec 1993. In Aug 1996, they added my brother and I to the house title via a quit claim deed as joint tenants with rights of survivorship.  My last parent passed away in 2024 and my brother and I sold the house in April 2025.  This was never the primary residence for me or my brother.

My understanding is that we have to pay long-term capital gain taxes.

How do we correctly calculate the long-term capital gain?

Do we need to find out the appraised value of the house when the deed was changed in Aug 1996?

Is the correct calculation: Sold Value in April 2025 divided by 2 (my brother and I) - Closing costs in April 2025 divided by 2 - Home value in Aug 1996 divided by 2?

Thanks

[Mike9241]

If your parents added you to the title of the house as a joint tenant with right of survivorship, you may have to pay tax on the capital gain when the house was sold. However, it is important to consult with a legal professional to understand the specific implications and tax consequences in your situation. 

worst case scenario your basis in 1/2 of the house is 1/4 of your parents' basis in the house when they gifted it to you in 1996 (put you on the title with Right of Survivorship). When the first parent died you inherited 1/3 of their ownership with a basis 1/3 of the fair market value on the date of their death. When the second parent died you inherited 1/2 their ownership with a basis of 1/2 of the fair market value on the date of their death.

your brother would have the same basis 

to further complicate things any improvements done could also affect your basis depending on when they were done. since this was never your primary residence you are not entitled to any home sale exclusion

[Hal_Al]

The usual rule, for a gift, is that the recipient's basis is the giver's basis (what your parents paid for it). But there is an exception for the gift of his/her home, where she retained the right to live there ("life estate"). "If you give away an asset and keep a life estate in that asset..... the cost basis of the house is "stepped-up" to the value of the house on date of death [IRC 2036]")

More info: http://www.law.cornell.edu/cfr/text/26/20.2036-1

A life estate does not have to be explicitly established in the deed. Your mother probably had an "implied life estate." If so, that would give you the stepped up basis. There is case law on this. Check with a good lawyer.

http://accessiblelaw.org/Documents/LifeEstates-Inheritances.pdf