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Richard
Richard, Tax Attorney
Category: Tax
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Experience:  29 years of experience as a tax, real estate, and business attorney.
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I along with my best friend purchased a home in 1993 for $135,000.

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I along with my best friend purchased a home in 1993 for $135,000. We bought the house under right of suvivorship. He lived in the house I lived in another house I had purchased solely in 1998. He passed away in Jan of 2011. I sold the home in March of 2011 for $265,000. I paid all expenses including mortgage payments(1st and 2nd) utilities and all repairs needed to close. It closed April 18th. This was not my primary residence as I still have my own home. Are the capital gains figured on what I walked away with (profit) at the closing table and am I allowed to deduct all expenses that I had to pay? I did use a real estate company.
Submitted: 2 years ago.
Category: Tax
Expert:  Richard replied 2 years ago.

Good morning. Each of you had an original basis in your house equal to 1/2 of $135,000 = $67,500. You would have increased your basis by any improvements to the property, but not repairs, utilities or mortgage payments. When your best friend died and you inherited his 1/2, the basis in that 1/2 was increased to the fair market value of the property times 50%....so your basis in his 1/2 is now 1/2 of $265,000 = $132,500. So, your taxable long term capital gain = Sale price (less closing costs) in excess of your basis ($67,500 + $132,500 + any improvements you made to the property).

 

 

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Please be aware that the information provided here is not legal advice. Rather it is simply general information. All states have intricacies in their laws and any information given is simply information only and specifically is not intended to be, nor does it constitute, legal advice. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

 

 

Customer: replied 2 years ago.
I don't understand. Will I be paying capital gains on $265,000 the sales price or the $84,000 which is what I received at closing.
Expert:  Richard replied 2 years ago.
You will have a gain of the $265,000 less your basis of $200,000 ... $65,000 less the closing costs of the sale. What you receive after the payment of your mortgage owed is not relevant.
Customer: replied 2 years ago.

In your professional opinion should I have a tax attorney file my claim this year vice a CPA? The last person I want to get in trouble with is the IRS.

Expert:  Richard replied 2 years ago.
No...this is not going to be complicated for them....the CPA can easily handle this.
Customer: replied 2 years ago.
Thank you - I appreciate your time.
Expert:  Richard replied 2 years ago.
My pleasure. You take care.
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 45999
Experience: 29 years of experience as a tax, real estate, and business attorney.
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