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Gerri A Harrison CFP EA
Gerri A Harrison CFP EA, Enrolled Agent
Category: Tax
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Experience:  27 years of preparing income tax returns - both personal and small business
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Question regarding my 2010 income tax liability for the sale

Resolved Question:

Question regarding my 2010 income tax liability for the sale of a home that my mother lived in but also had my name on the deed. She purchased this 2nd home in 2008 with the intention of moving from her 1st home into this 2nd home. She did start to move and lived in both homes, then added my name onto the deed of this 2nd home in 2009. She then decided to sell this 2nd home this year 2010. My name was not taken off the deed prior to sale. She purchased the property in 2008 for $60K and sold it this year for $53K, loosing about $7K. At the closing, they informed me that I had 50% of the proceeds from the sale, I declined these proceeds and had them note that on their paperwork but they then told me that I would still receive tax doc's showing I received 50% of the proceeds. My question is this. I didn't pay for this house, only agreed to have my name added to it for my mother's sake. There was an over-all loss on the sale and I never lived in it. So, am I going to have to pay capital gains or any tax on the 50% or roughly $26K of the sale since I co-owned it? Also, I am a Nebraska resident and my mother lives in Illinois both homes were in Illinois, she has a small limited income and almost no tax liability.
Submitted: 4 years ago.
Category: Tax
Expert:  Gerri A Harrison CFP EA replied 4 years ago.

No, you will not need to pay any capital gains. When calculating capital gains/losses you take the original cost basis ($60k) and subtract it from the sales price ($53) so in this case there would be a $7k loss. Normally since you did not use the house as your primary residence you would be able to use that capital loss to offset other income.

 

However, in this case since you never contributed any of the initial cash nor received any of the proceeds, 100% of the loss would be used on your mother's return. If you try to claim a portion of the loss you would run into the gift tax rules so I recommend you do not claim that loss.

 

You will receive a tax document showing the sale for $26500. What you need to do on a Schedule D is to show a sale of $26500 and a purchase price of $26500. This will have no effect on your tax return. What is will do however is keep IRS from coming to determine why you did not report the $26500 and having to go through the explain of what transpired.

 

This should be good news to you - you will owe no taxes. If you still have a specific question please hit the need info button and ask. If you are satisfied with the answer please hit the green accept button to close out the question and allow me to receive payment.

Gerri A Harrison CFP EA, Enrolled Agent
Category: Tax
Satisfied Customers: 252
Experience: 27 years of preparing income tax returns - both personal and small business
Gerri A Harrison CFP EA and other Tax Specialists are ready to help you
Customer: replied 4 years ago.
Very Good Information, thank you. One question (last question), on the schedule D, mentioned in the last paragraph, even though I didn't pay anything for the home, putting the purchase price at 25600 will not get me in trouble?

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Gerri A Harrison CFP EA
Gerri A Harrison CFP EA
Financial advisor/Tax preparer
166 Satisfied Customers
27 years of preparing income tax returns - both personal and small business