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Marvin,EA, Enrolled Agent
Category: Tax
Satisfied Customers: 1672
Experience:  Enrolled to Represent Taxpayers Before The IRS
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Capital Gains Tax on Home Sale

Resolved Question:

My parents purchased a rental house and to avoid creditors attaching it, placed it into my name. Years later, the house my name, but on the closing paperwork, it states the sale check to be written out to my mom. I did not spend any money on the purchase, nor did I receive any funds from the sale. Am I required to pay capital gains tax on this and if not, how do I document to the IRS that I''m not responsible
Submitted: 8 years ago.
Category: Tax
Expert:  Marvin,EA replied 8 years ago.
Hello and thank you for using Just Answer. Did you parents deduct any expenses from the income received from the rental house? Did you parents have any depreciation deducted from the rental home?
Expert:  Marvin,EA replied 8 years ago.
Also, did you parents received any income from the rental home?
Customer: replied 8 years ago.
Reply to Marvin,EA's Post: Thank you for answering. I don't believe they did have expenses deducted other than closing costs.
As for depreciation, I believe the house was purchased for around $75,000. and sold for $92,225. The "cash to seller" after settlement fees was $80,795.10.
Expert:  Marvin,EA replied 8 years ago.
If your parents did rent the house for income they will report their net gain as long-term capital gain. Their gain is $5,795 ($80,795.10 minus $75,000) and will be tax at the long-term capital rate of 15% which will be $869 capital gain tax. Since you did not received any funds from the sale and the check is in your parents name you do not have to report the sale on your income tax or pay any capital gain on the sale. You should get a copy of the check your parents received from the sale and keep it for 3 years.
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Customer: replied 8 years ago.
The check has already been cashed. Would the settlement paperwork suffice or a letter from the title company stating the check was written out to my mom?
Yes, they did rent the house & receive rental funds from it. Thank you.
Expert:  Marvin,EA replied 8 years ago.
If you can get a copy of the settlement paperwork or a letter from the title company stating that the check was issued in your mother name would be enough for the IRS to prove the you did received any funds from the sale. Also, if you can get a keep a copy of your mother tax return that report the gain from the sale of the home for 3 years.

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