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MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2342
Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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My sisters and I were given property in 1987 as part of my

Resolved Question:

My sisters and I were given property in 1987 as part of my parents divorce. My father died in November 2007 and we sold the property in October 2008 for $127,000. Do we have pay capital gains tax? If so, how much?
Submitted: 7 years ago.
Category: Tax
Expert:  MequonCPA replied 7 years ago.



Normally, the asset allocation is between spouses. Please provide additional information about the property received, basic description, when/how your parents acquired the property, any information as to how the transfer took place at the time of divorce, etc.



Customer: replied 7 years ago.
My father was an alcoholic. He and my mom were given the house and property by his father. The deed was put in all three of our names and we paid the taxes. My father was guaranteed a lifetime home. He died and we sold the property which consisted of a small bungalow house with 2 bedrooms and 1 bath sitting on 2 acres of land. It was in need of a lot of repair so the true value was in the land. We had to clean up the place and have two outer buildings demolished in order to sell it.
Expert:  MequonCPA replied 7 years ago.



There are at least two possible answers based on the information provided.


1. Your father retained a life estate in the property and you and your sisters were gifted a residuary interest in the property that took effect upon his death. In this case, your basis in the property would be its fair market value on his date of death. Upon sale you would subtract from the selling price this basis, any improvements you made after his death and any closing costs related to the sale (commission, title insurance, transfer tax, etc). This amount would be the gain to be reported and allocated between you and your sisters.


2. You and your sisters each obtained as a gift, an undivided 1/(#of siblings + 1) interest in the property. Your basis would be your percentage interest of your grandparent's basis in the property plus any improvements made since they purchased it. Upon your father's death you would each be allocated a percentage of your father's interest. This portion of the basis would be at fair market value on his date of death.


If possible you should consult with the attorney that handled the original transfer to assist you in determining your basis for gain or loss.

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