Will I have to pay capital gains on parent's home now in my name?

[AmeliesUncle]

This is a complicated situation that TurboTax does NOT support.  You need to go to a tax professional that is familiar with Life Estates, Remaindermen, etc.

[Pauls]

Do I pay capital gains tax if:

my dad did a quit claim deed and gave me his half. My mom has the other half and lived there for 17 years.
I lived in the house for almost 17years, but only was on a deed for few months. We want to sell the house now. 

[Mike9241]

what is the reason for the sale?

since you did not own the house for any two out of five years before the sale, normally there would be no home sale exclusion available to you.

however,  a reduced exclusion may be available to you if the reason for sale is any of the following

1) health of either you or your mom, if the primary reason for the le is to obtain, provide, or facilitate the diagnosis, cure, mitigation or treatment of a disease or

2) the primary reason is a change in place of employment. the new place of employment must be at least 50 miles farther from the taxpayer's home than the former place of employment was or

3) unforeseen circumstances. this is a wide open category so the reason for the sale is critical. 

your basis in the home is your dad's basis on the date of the gift

2) 

[Pauls]

The reason is for my mom to move closer to us. She is taking chemo. 
So it does not count that I lived in the house we’re selling for the last 2 out of 5 years? 
I was just put on a deed recently. 

[NCperson]

@Pauls  - suggest seeing a local attorney to unravel this before the home sells.  could save you a lot of unncessary taxes. 

why did your father quit claim deed 1/2 to you and not Mom? there would be no FURTHER tax implixations if Mom owned 100% 

[Carl]

@Pauls  

So it does not count that I lived in the house we’re selling for the last 2 out of 5 years?

No, it does not count. You must have lived in the house as your primary residence for at least 2 of the last five years *YOU* owned it. You state you've only been on the deed "a couple of months" which gives me the impression the property was deeded to you in 2022. So you haven't lived in the house as your primary residence for even a full year *since you owned it*.

The reason is for my mom to move closer to us. She is taking chemo.

That's not really a valid reason for "you" having ownership the property.

[xmasbaby0]

@Pauls  Consult an elder care attorney ASAP.    If your mother ends up going on Medicaid (not to be confused with Medicare)   there is a five year lookback on any assets she owns that she gave away or transferred into someone else's name.   You had better understand that and plan accordingly. 

[nbhousenb]

I can't see where to post a question without replying to something already posted by my question is similar.

My father and his sister inherited their parents house after they died.  It is a 3 family house and their parents lived on one of the floors.  My father and his sister don't live there.

My father eventually bought his sister's 1/2 out when she no longer wanted to own the property.

At the guidance of his lawyer, He quit claimed it to me for one dollar (which was never taken and I do not think I ever signed anything ) and retained a life estate on the property that kept it under his control and he paid the taxes and received whatever rent came in.  It did not allow me to sell, mortgage or do anything with the property without his consent and it would pass to my control after he died the lawyer said.  Supposedly this kept the house as his and directed where it went after his death, but separated it from the value of his estate for tax purposes.  It would not be mine until he passed which was why he paid the taxes took any rents etc.

He has since passed and the time has come to sell it.  What would my tax basis be?  The value of the quit claim for a dollar?  The value when he died and the house became under my control or some other number?

The lawyer may no longer be alive and I need to sell for medical reasons.

[M-MTax]

@nbhousenb your basis is the FMV on the date your father died. He should've filed a gift tax return when he gave you the remainder but that's neither here nor there now.

[Opus 17]

@nbhousenb 

With a life estate, you inherit the house with a fully stepped-up basis equal to the fair market value on the date he died.  (Everything that happened before is ignored). However, it would still be wise to see an attorney or tax professional.  To be valid, the deed would have been recorded in the county clerk's office, even if you never got a copy.  You need someone to look at that deed and make sure it really says life estate.  A life estate can also be implied based on the circumstances even if not written down, but if it wasn't written down, you will want to thoroughly document the circumstances in case you are later audited.  If the deed wasn't recorded with the county, that is also something that will need to be fixed before you can sell it. 

[M-MTax]

Deeds don't have to be recorded to be valid. But it's a sure bet that this one was recorded if an attorney drew it up.