My husband and I got gifted his parents house. now selling it after never living in it ourselves. The house will close on 21/31. Will we pay capital gains taxes?

[madelinemp]

Not 21/31- December 31 of 2020

[Anonymous_ · Accepted solution]

Whether you have a gain (for federal income tax purposes) will depend upon whether your selling price (less selling expenses) is greater than your basis in the house.

For gifts, your basis for figuring a gain is the same as your husband's parent's adjusted basis, plus or minus any required adjustments to basis while you held the property.

See https://www.irs.gov/faqs/capital-gains-losses-and-sale-of-home/property-basis-sale-of-home-etc/prope...

[AmeliesUncle]

It seems likely there is more to the situation than what you have told us.  What was the purpose of the gift?  What was the house used for after it was gifted to you?  Did his parents continue to live there after it was gifted to you.

There could be a Life Estate involved or other things, which will change how it is treated on the tax returns.  Depending on the circumstances, you may consider a good tax professional to look at the situation.

[madelinemp]

My father in law gave it to us to fix up and live in. Once we got into the house we realized that was not going to happen. So we cleaned out and put it up for sale. Never having living in it. It is no closing for 20k less than when his father bought it. This closing happens at the end of this year on the dot. 
I’m wondering what our potential hit is going to be from the capital gains tax.

[AmeliesUncle]

Okay, then it does sound like an actual gift.

If it is sold for less than what his father paid for it, there will not be any tax owed on the sale.