Purchased a home from father in law, he gave a gift of equity of 105,000. If we sell the house in less than two years to purchase a different home, capitol gains tax?

[awtoz]

Do I have to pay capitol gains tax on the sale of the house and if so on what basis the total sale minus the gift or does the gift count towards value and not the loan we got?

[TaxGuyBill · Accepted solution]

You Basis is your generally your actual cost.  So the paperwork shows a total price of $305,000 (which includes the $105,000 Gift of Equity), your Basis is $200,000.

[fanfare]

If you're paying a mortgage on, say, 80% of $305,000, you're getting ripped off, don't you think? What kind of gift is that?

[awtoz]

The home appraised at 165,000, we borrowed 65,000 to buy the home from my father in law, he had inherited it and did not want it.  So for instance if we sold it at 169,000, would we be responsible for the capitol gains on 104,000 or 4,000 by selling it within one year to purchase a new home.  Thanks

[awtoz]

The home appraised at 165,000, we borrowed 65,000 to buy the home from my father in law, he had inherited it and did not want it.  So for instance if we sold it at 169,000, would we be responsible for the capitol gains on 104,000 or 4,000 by selling it within one year to purchase a new home.  Thanks

[TaxGuyBill]

If you paid $65,000, your Basis is $65,000.  So that would be a $104,000 gain.

[fanfare]

gift of equity is an accounting gimmick invented by the bank mortgage dept.

Look at the "consideration" shown on the deed you will be filing with the county clerk.
That is your cost basis.