We have been renting property
from my parents for 3 years. We are now purchasing the property. My parents are gifting us
the equity in the house to use as a down payment. We are trying to figure out if there will be any capital gains tax
and if so who has to pay it.
Here are some of the details:
My parents purchased the house in 1992 for $194,000.
The home is considered rental property
on my parentâ€™s taxes has been depreciated for 2 years.
Their adjusted basis-$192,000 (depreciation
added back in, declared loss from rental deducted)
Current Appraised Value-$250,000
Our loan amount-$200,000
Since my parents are selling it to us for $200,000 I understand the difference between the sales
price and the fair market value is considered a gift. What do we use to calculate the fair market value? Is it the appraised amount?
Would my parents have any capital gains tax?
If so what amount does it apply to?
If we sell the house before living in it for 2 more years, what is our basis for figuring if we would owe capital gains tax?