Received a quit claim in July 2016 for a residential property from my uncle. He put $10 on the claim form for me. In September 2017, I decided to sell the property. Since he and his wife has owned it (from 1985), they put in over 85k in repairs. The market value was approximately 147k when I received property in 2016. When I sold it in 2017 for 142k, which was over one year, it had an approximate price of 143k. I spent over 22k in repairs before selling it. I was wondering if I have to pay profit gain taxes? During my ownership period, I used the property to do to renovations.
Yes, a Quit Claim Deed transfers a property at the same basis as the original owner. You will need to know what the basis was for the previous owner in order to report the sale.
Basis is the original purchase price, including closing costs, plus any improvements to the property. Any costs you incurred making the property ready for sale would be including in the selling costs when you report the sale.
The sale of this house may be reported in one of three ways:
- You lived in the house for at least two of the last five years. If this is true, you may not need to report the sale on your tax return. See: Is the Sale of My Main Home Taxable?
- You never lived in the house or used it as a rental. In this case, you report this as an Investment Sale. See: How Do I Report the Sale of a Second Home?
- You used the house as a rental property. This sale is reported under Rental Properties & Royalties. See: How do I report the Sale of Rental Property?
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