Solved: Tax rate for receiving gift
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Tax rate for receiving gift

spouse was granted a gift of 1/6 owner of a home in 1994 which parents lived in until 2017. Parents now deceased and house was sold. Does spouse owe taxes on her portion of the proceeds from the house. her portion above $19k

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Level 15

Tax rate for receiving gift

No. The "proceeds" are not taxable. The capital gain on the sale of a gift tax is what is usually taxable, not the sale amount. 

However, it appears you essentially have an inherited house not a gifted house. The usual rule, for a gift, is that the recipient's cost basis is the giver's basis (what you parent paid for it). But there is an exception for the gift of her home, where she retained the right to live there ("life estate"). 

(seehttp://www.njelderlawestateplanning.com/2010/02/articles/estate-and-inheritance-tax/life-estates-est... which states in part "If you give away an asset and keep a life estate in that asset..... the cost basis of the house is "stepped-up" to the value of the house on date of death [IRC 2036]")

More info: http://www.law.cornell.edu/cfr/text/26/20.2036-1

 

Sale of Inherited Home

Sales of real estate are usually reportable on your tax return, especially if a form 1099-S is issued. There will most likely be no capital gain and therefore no tax. Any capital gain would be on the difference between what the house was worth on the date of the decedent's death (your "cost basis") and what the house sold for. The listing price is irrelevant. If you made any improvements, those costs would be added to your cost basis in determining the capital gain. If this house was your "principal residence, the gain is not taxable. Whether you have a deductible capital loss is dependent on the answers to questions others have asked above.

If you lived in the house, you cannot take a deduction for a loss on the sale of a residence, even a second home.

If the house was "investment property", and sat vacant all this time, you can deduct the loss.

If it was rented out, you can still deduct the loss (it's rental investment property), but you must "recapture" the depreciation allowed or allowable. That is, you must report the depreciation taken (or that you should have taken), over the years, as income on your tax return in the year you sold it. It essentially reduces your capital loss, but the capital loss and recapture are reported in different places on the tax return.

 

Type> 1099-S, sale of property other than main home <in the find (search) box. Click Jump to. Say no when asked if you got a 1099-B. Then follow the rest of the interview.

View solution in original post

1 Reply
Level 15

Tax rate for receiving gift

No. The "proceeds" are not taxable. The capital gain on the sale of a gift tax is what is usually taxable, not the sale amount. 

However, it appears you essentially have an inherited house not a gifted house. The usual rule, for a gift, is that the recipient's cost basis is the giver's basis (what you parent paid for it). But there is an exception for the gift of her home, where she retained the right to live there ("life estate"). 

(seehttp://www.njelderlawestateplanning.com/2010/02/articles/estate-and-inheritance-tax/life-estates-est... which states in part "If you give away an asset and keep a life estate in that asset..... the cost basis of the house is "stepped-up" to the value of the house on date of death [IRC 2036]")

More info: http://www.law.cornell.edu/cfr/text/26/20.2036-1

 

Sale of Inherited Home

Sales of real estate are usually reportable on your tax return, especially if a form 1099-S is issued. There will most likely be no capital gain and therefore no tax. Any capital gain would be on the difference between what the house was worth on the date of the decedent's death (your "cost basis") and what the house sold for. The listing price is irrelevant. If you made any improvements, those costs would be added to your cost basis in determining the capital gain. If this house was your "principal residence, the gain is not taxable. Whether you have a deductible capital loss is dependent on the answers to questions others have asked above.

If you lived in the house, you cannot take a deduction for a loss on the sale of a residence, even a second home.

If the house was "investment property", and sat vacant all this time, you can deduct the loss.

If it was rented out, you can still deduct the loss (it's rental investment property), but you must "recapture" the depreciation allowed or allowable. That is, you must report the depreciation taken (or that you should have taken), over the years, as income on your tax return in the year you sold it. It essentially reduces your capital loss, but the capital loss and recapture are reported in different places on the tax return.

 

Type> 1099-S, sale of property other than main home <in the find (search) box. Click Jump to. Say no when asked if you got a 1099-B. Then follow the rest of the interview.

View solution in original post

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