Sell interest in home

[bc-23]

My mother-in-law changed the title of her house and put it in the names of my husband and his brother.  My husband's brother lived with her until she died, and continues to live there now.  If my husband decides to sell his half of the house to his brother, what are the tax implications?

[STaxLady]

Hello @bc-23 ,

I'm happy to help you with this great question!

First, let me say that I am sorry for the loss of your mother-in-law.

When selling property, only the gain on the sale is taxable.

To determine if there is a gain, you have to know your husband's basis in his portion of the home.

Based on your comments, it appears that your mother-in-law gave the home to her sons as a gift.

The following IRS article provides guidance on determining the basis in property received as a gift:

https://www.irs.gov/faqs/capital-gains-losses-and-sale-of-home/property-basis-sale-of-home-etc/prope... 

A loss on the sale of personal property is not tax deductible. However, a gain on the sale is taxable.

If the property was held in his name for more than one year, more favorable long-term capital gains tax rates would apply. If it is sold in less than a year from the date it was gifted to him, ordinary income tax rates would apply to any gain on the sale.

I hope that this answers your question. Please, feel free to reach out with any follow up questions that you may have.