If a son gifts a property to his senior citizen mother ..how capital gains tax is calculated if she sells?

[curious4913]

In WA state 

Son has a property that he owns for 2 years as his sole property before that he was joint owner with his wife for 10 years.

If this son gifts his sole property to his mother via quitclaim deed and after a couple of months if she sells the property how capital gains tax is applied? Mother is retired and her annual income is about 10k.

If mother sells in couple of months after she received gift..is it considered short term capital gains or son's holding period period applies for example 2 years or 10 years? in other words long term capital gains?

In any case I think mother's basis is son's (donor's) adjusted basis correct?

How to find out son's adjusted basis...he did not keep records of all improvements and cost in last 10 years of ownership.

[tagteam]

Duplicate post.

See https://ttlc.intuit.com/community/taxes/discussion/re-how-to-calculate-adjusted-cost-basis-when-gift...

[PaulaM]

The mother's basis is the son's adjusted basis. Increase the son's basis for any records that you can find. If recreating records, provide good documentation for any estimations. The son's personal labor is not added as an adjustment. Only materials and labor that was not his.

Tagteam is correct.

[Edited 11/26]

[tagteam]

If the basis is figured using the donor's basis, the donee's holding period includes the donor's holding period (tacking applies) so the donee's holding period would be long-term in this case.

See https://www.irs.gov/publications/p544#en_US_2018_publink100072644

See also Treas. Reg. §1.1223-1(b)

[curious4913]

I think Paula is wrong....Mother also receives gift of holding period from son/donor

[curious4913]

U said if basis is figured on cost basis of a donor than holding period pass on to mother but ...who or what decides basis is figured on donor's basis or fair market value at the time of gift?

I mean what are the rules what should be applied?

[tagteam · Accepted solution]

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@curious4913 wrote:

U said if basis is figured on cost basis of a donor than holding period pass on to mother but ...who or what decides basis is figured on donor's basis or fair market value at the time of gift?

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Given the facts set forth here, it is a pretty safe bet that the donee will take the donor's basis and, therefore, also take the donor's holding period. The only way the basis would be different is in the event the fair market value of the property was less than the donor's basis at the time of the gift (which is rather unlikely).