How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Merlo Your Own Question

Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
9573734
Type Your Tax Question Here...
Merlo is online now
A new question is answered every 9 seconds

I need advise on a quick deed loan and selling the house, taxes

Resolved Question:

I need advise on a quick deed loan and selling the house, taxes etc.
Submitted: 5 years ago.
Category: Tax
Expert:  Merlo replied 5 years ago.
Hello bonehead,

1. Are you the one who was listed as the owner when the home was sold?

2. If you were still listed as the owner, how long had your name been listed as an owner, and did you live in the house yourself as your main home for at least 2 of the 5 years preceeding the sale?

3. What did your friend originally pay for the home?

Customer: replied 5 years ago.
I was listed as the owner. My name was listed for 3 years I did not live in the house but I had furniture and what not in it as I work for the militarty and travel a lot. My friend paid 50K for the house.
Expert:  Merlo replied 5 years ago.
Hello again bonehead,

The reason I asked if you had lived in the home, is that the IRS allows an exclusion of up to $250,000 on the sale of your primary home when you sell it, but in order to qualify for that, you must have lived in the home for at least 2 of the last 5 years preceeding the sale.   Since this does not apply to you, then you will owe capital gains tax on the gain you had from the sale.

Since your friend basically gifted you this property, you retain the same basis as your friend's at the time the gift was given. Your friend's basis would have been the $50,000 that he originally paid for the home, plus the cost of any capital improvements that he made over the years that he owned it. So as an example, if he put on a new roof and added a new A/C unit and new furnace and made total improvements of say $10,000, then his basis would be $60,000 total. That same basis passes on to you when he gifted you the home. You do not go by the current market value of the home at the time he gave you the property.

To figure the gain you had from the sale, you take the selling price less your basis. So if the selling price was $322,500 and your basis was $60,000, then you had a gain of $262,500. You would be liable for long term capital gains tax on that gain, and that tax rate is currently capped at 15%. So your federal tax on that sale would be approximately $39,375. You would also owe state tax to Utah at a rate of 5% for a total of approximately $13,125.

You mentioned in your post something about gift tax, however, this probably will not apply. Under current law, every individual is allowed to give gifts of up to $1 million in their lifetime before any tax is due. Unless your friend had already given away this much in gifts, then no tax would be due. He would, however, be required to report the gift by filing Form 709 with the IRS. There is no tax due with the form, but it is a reporting requirement. The value of the gift given then reduces his $1 million lifetime limit.

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

Thank you bonehead, and please let me know if you need any further clariifcations on this.

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Merlo and other Tax Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
 
 
 
Chat Now With A Tax Professional
Merlo
Merlo
Tax Professional
9783 Satisfied Customers
25+ years tax consulting. Specializing in returns for US citizens living abroad