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.
