Gift of Equity and Capital Gains on home between F...
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New Member

Gift of Equity and Capital Gains on home between Family

We bought home from Mother - it was never her primary residence so I don't think the exclusion would apply in any sort of way (but it was her only mortgage). It Appraised 170K.  Sale price 150K (30K of the equity was used as our down payment so our loan was only 120K). She orig bought home for 137K. So

1) is the gift of equity $20k (diff between appraisal and sale price) or the 30K we used as the down payment or both at $50K?

2) Do we only report gift from 1 less the $30K permitted in a year or full gift?

3) Would she pay capital gains on the 13K  (diff of sale 150 - 137 original) or not at all since she did not make anything as she gifted us the diff as equity - she got no cash or gain from the sale -it was only just in her name on paper?

3 Replies
Employee Tax Expert

Gift of Equity and Capital Gains on home between Family

1) Yes, she gifted you $20,000

2) You can consider that she gave you each $10,000 (if indeed she did) and no Gift Tax Return is needed

3) She pays tax on the gain, regardless of what money she received or did not receive in hand.

 

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New Member

Gift of Equity and Capital Gains on home between Family

Another expert mentioned that the equity used as down payment of 34K can be considered part of her cost basis?

Employee Tax Expert

Gift of Equity and Capital Gains on home between Family

Yes. You said that $30k of the equity was used for a down payment. and the loan was $120k. Both combined are the $150k basis.

 

Or, are you saying that the $30k of equity was also a gift and you put down $30k cash as a down payment.

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