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My condolences on the loos of your parents. If the property can not be claimed as your primary residence, the capital gains is calculated by the purchase price (sale price) less on the donor's adjusted basis at the time of the gift (what was paid for the property increased by capital improvements your parents paid for prior to gifting the propert) less the cost of a sale (real estate fees, improvements, repair). For example, parents buy a house for $50,000 and over years put in an additional $50,000 in improvements (i.e. an addition, new roof, fence, plumbing, etc), then gift the house to a son during their lifetime. The son has a basis of $100,000 in the property. If son then puts in $100,000 worth of improvements and spends $50,000 for the sale of the home with proceeds of $500,000 for the sale : the capital gains is based on sale of $500,000 less adjusted basis of $250,000 which equals a capital gain of $250,000.
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