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i_2020
New Member

Tax on capital gain of gift

My mother lived in her own house, owned a condo and rented it out to some people. She also claimed depreciation on the condo throughout the years of her ownership. The condo actually went up in value.
Last year, she gave the condo to me as a gift. Beside the possible gift tax liability as donor, does she have to pay tax on the capital gain of the condo?
1 Best answer

Accepted Solutions
Coleen3
Intuit Alumni

Tax on capital gain of gift

There are several points to address.

1) There will be no capital gain as she didn't sell it for a gain. She will have to recapture the depreciation she took.

2) She will not have to actually pay any tax although she will have to fill out a Form 709. There is a yearly exemption amount of $14,000. The U.S. has a unified gift and estate tax system.  Gifts you make during your lifetime are treated similarly to gifts made from your estate after your death. Everyone has a lifetime exemption from gift and estate tax -- $5.43 million for 2015.

https://www.fool.com/investing/general/2015/10/03/form-709-do-you-need-to-file-a-gift-tax-return.asp...

3) You basis in the house is figured below.

Question: What is the basis of property received as a gift?

Answer:

To figure out the basis of property you receive as a gift, you must know three amounts:

  • The adjusted cost basis to the donor just before the donor made the gift to you.
  • The fair market value (FMV) at the time the donor made the gift.
  • The amount of any gift tax paid on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.

If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your adjusted basis depends on whether you have a gain or loss when you dispose of the property.

  • Your basis for figuring a gain is the same as the donor's adjusted basis, plus or minus any required adjustments to basis while you held the property.
  • Your basis for figuring a loss is the FMV of the property when you received the gift, plus or minus any required adjustments to basis while you held the property.

Note:  If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither a gain nor loss on the sale or disposition of the property.

If the FMV is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. If you received a gift after 1976, increase your basis by the part of the gift tax paid on it that is due to the net increase in value of the gift. To figure out the net increase in value or for other information on gifts received before 1977, see Publication 551, Basis of Assets. Also, for figuring gain or loss, you must increase or decrease your basis by any required adjustments to basis while you held the property

View solution in original post

1 Reply
Coleen3
Intuit Alumni

Tax on capital gain of gift

There are several points to address.

1) There will be no capital gain as she didn't sell it for a gain. She will have to recapture the depreciation she took.

2) She will not have to actually pay any tax although she will have to fill out a Form 709. There is a yearly exemption amount of $14,000. The U.S. has a unified gift and estate tax system.  Gifts you make during your lifetime are treated similarly to gifts made from your estate after your death. Everyone has a lifetime exemption from gift and estate tax -- $5.43 million for 2015.

https://www.fool.com/investing/general/2015/10/03/form-709-do-you-need-to-file-a-gift-tax-return.asp...

3) You basis in the house is figured below.

Question: What is the basis of property received as a gift?

Answer:

To figure out the basis of property you receive as a gift, you must know three amounts:

  • The adjusted cost basis to the donor just before the donor made the gift to you.
  • The fair market value (FMV) at the time the donor made the gift.
  • The amount of any gift tax paid on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.

If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your adjusted basis depends on whether you have a gain or loss when you dispose of the property.

  • Your basis for figuring a gain is the same as the donor's adjusted basis, plus or minus any required adjustments to basis while you held the property.
  • Your basis for figuring a loss is the FMV of the property when you received the gift, plus or minus any required adjustments to basis while you held the property.

Note:  If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither a gain nor loss on the sale or disposition of the property.

If the FMV is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. If you received a gift after 1976, increase your basis by the part of the gift tax paid on it that is due to the net increase in value of the gift. To figure out the net increase in value or for other information on gifts received before 1977, see Publication 551, Basis of Assets. Also, for figuring gain or loss, you must increase or decrease your basis by any required adjustments to basis while you held the property

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