Bought and Sold a Home in the Same Year - Not Primary

[HKam]

My spouse and I bought a home in May 2023. It was not our primary residence. It was purchased with the sole intention of reselling it to our son at a lower cost. (Due to the crazy real estate market, we could purchase with cash and then, once we had the home, he could apply for a mortgage and purchase from us). He purchased it in July 2023, so we owned the home for 2 months. We made no improvements to the home and we did not rent it out or make any money on the home. The difference between what we paid for the home and what he paid for the home is $30,000. We consider it a gift. 

We do have a 1099-S form from the real estate transaction. It indicates I must file forms 4797, 6252 and/or schedule d. I do not believe 6252 comes into play because there was nothing to do with installments. 

In TurboTax, when I fill out the form for 4797, I am in part II (ordinary gains and losses). It calculates the $30,000 loss, but I can't seem to override the form to show just zero. I'm pretty sure I'm not allowed a tax break because of the gift. 

Any thoughts on how to report this correctly to  the IRS?

[tagteam · Accepted solution]

You should not need Form 4797 nor, obviously, Form 6252.

Rather, this appears to be nothing more than the sale of a second home (i.e., you did not purchase the home for rental nor business purposes).

As a result, you would report the sale on Form 8949 (and Schedule D) as a short-term transaction. 

Your basis would be your cost in May of 2023 (assuming no improvements were made) which would then be subtracted from the selling price (whatever your son paid less selling expenses) to arrive at your gain or loss.

Note, however, that any net loss on this transaction would not be deductible.

[tagteam]

Also, your son's basis in the home would be governed by Treas. Reg. § 1.1015-4:

See https://www.law.cornell.edu/cfr/text/26/1.1015-4

[HKam]

Excellent! I so appreciate your quick response and understanding of my issue.