Jax Tax : First, yes there is going to be capital gains. The gain will be the difference in your basis and the selling price. The basis calculation is going to be tricky.
Jax Tax : First, it was deeded for a dollar which is effectively a gift assuming the deed value of $1 is also what was initially paid for it. If you all three owned 1/3 then your individual basis started at 33 cents each.
Jax Tax : X that.
Jax Tax : Your basis did not start at a dollar. Your basis each would have transferee from the donor. Each of your basis would be 1/3 of what the donor's basis was.
Jax Tax : How do you figure that out? You either know or you don't. If you don't, then it is zero.
Jax Tax : Then your father dies. Who ever took his portion got a step up in basis on his 1/3. If split the 1/6 each.
Jax Tax : The basis in that portion then became the fair market value of that 1/3 on the date of death. The remaining amount 2/3 stayed as it initially was.
Jax Tax : So now when it is sold, you each (two of you) must file the portion you now own on your own schedule D. You report your percentage of the sale against your basis. The difference is long term capital gain.
I guess I'm a little lost. My wife and I bought the house in 1971 for $20,000. My Mom and Dad bought it from us in 1977 for $38,000. They deeded it back to us in 1987 for $1.00. My father is dead and my mother moved out. What's the capital gain?