Hello XXXXXXXXXXXX,

Basically you received the property in PA as a gift. Whenever you receive property as a gift, you retain the same basis as the donor's basis. So your basis in the home in PA would be the same as what your father's was at the time he gave you the home, plus the cost of any improvements you may have made on your own. If your father had purchased the home originally for $50,000 and then made another $10,000 in improvements, then his basis would be $60,000. That basis then passed to you when he gifted you the property. After the title passed to your name, if you then made another $10,000 in improvements, you now have a basis of $70,000.

When the home is sold your gain would be figured by taking the selling price less your basis. So using the same figures in the above example, if you sold the home for $100,000, your gain would be $30,000. This gain would be taxed as a long term capital gain which currently has a maximum tax rate of 15%. You would also owe taxes on that same amount to the state of PA at a rate of 3.07%.

The same thing will apply if he turns over this home to you in FL. His basis in the home will pass to you and when the home is sold you would owe capital gains tax on the gain, which would be calculated in the same manner as the previous example. The only difference with the retirement home in FL is that FL has no state taxes that would be due.

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Thank you XXXXXXXXXXXX

Hello again XXXXXXXXXXXX,

I apologize for the confusion. Everything that I stated in my first response should have referred to the house you are selling as being in NJ. The one thing that does change is the state tax you would owe on the sale. You would of course owe state tax to NJ instead of PA since that is where the property is located. The tax rates in NJ are graduated, but the average tax rate there would be around 6%.

If you invest the sales proceeds from the sale of a personal residence in to another personal residence, taxes would still be due on the sale. The only time that you can use the proceeds from one sale and reinvest them in another property and defer the tax is with investment property, such as a rental home or apartment building or business. It does not apply to homes used as a personal residence.

Years ago the IRS used to allow taxpayers who sold their primary homes to reinvest the sales proceeds into another primary home, and no tax would be due. However, this rule is no longer in effect, plus this is not your primary home that is being sold.

The IRS replaced the replacement rule on the sale of a personal residence with an exemption amount which they now allow. Under current laws, if you sell your primary residence then you can exclude $250,000 (or $500,000 if you are married) from any gain you have on the sale. However, this only applies to the sale of your primary residence. If you did not actually live in this home yourself for at least 2 of the last 5 years, then this does not qualify to be treated as your primary residence, and no exclusion is due on any gain you have from the sale. The full gain would be subject to the taxes mentioned earlier, which would be 15% federal and approximately 6% for NJ tax.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you XXXXXXXXXXXX

Hello again XXXXXXXXXXXX,

What do you mean that your last answer was locked?

Did you not see my second reply to you?