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RD
RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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A home in PA was given to me and my sister, who lives in PA

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A home in PA was given to me and my sister, who lives in PA and I live in NJ, by our mother in 1968. My sister lived in the home and we shared all improvement expenses. She paid all the real estate taxes The home was sold in April 2008. How does the capitol gains effect me living in New Jersey and my sister living in PA?
Submitted: 6 years ago.
Category: Tax
Expert:  RD replied 6 years ago.

I presume that you both own the house equally.

 

Since you both received this property as a gift from your mother, your cost basis in the property is the same as your mother's cost. You can increase the cost basis with any capital improvements you must have made to the property.

 

When the property is sold- each of you will report 50% of the sale on your tax return. The capital gain will be subject to tax to each of you. Capital gain will be calculated as 50% of sales price minus 50% of selling expense minus 50% of the original cost basis of your mother minus any capital improvements made.

 

Presuming none of you used this property as your primary residence - the gain will be long term and subject to tax upto a maximum of 15%. This gain will also be subject to tax in PA since the property is located in PA.

 

 

Let me know if you have any question.

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

 

Customer: replied 6 years ago.
My sister is 84 years of age, single and occupied the home from 1968 to the time of sale as her principal residence. She now resides in a "SENIOR CITIZEN LOW IMCOME" apartment in Carbondale, PA
Expert:  RD replied 6 years ago.

If she occupied the property as primary residence than she will be able to exclude upto $250K from her gain and not owe any tax on it. Any gain over $250K will be subject to tax.

However, you will not be able to use this exclusion on the gain calculated on your 50% share since you did not occupy the same as principal residence and hence will owe tax on the entire gain related to your 50% ownership.

 

 

Let me know if you have any question.

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

 

 

Customer: replied 6 years ago.
Thank you very much. One final question, does the $250K exclusion also apply to Pennsylvania capitol gaIn tax for my sister?
Expert:  RD replied 6 years ago.

Yes, the exclusion also applies for PA State tax.

 

Let me know if you have any question.

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

 

RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience: CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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RD
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CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..