Hello and thank you for using Just AnswerIf your son-in-law gifts the property to you then you will need to meet the rules to exclude as your main home if you sale and do not wish to pay capital gain on the difference in sales price and basis.You are eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its sale.So although you would meet the used portion you would still ned to own the property for 2 years.
If you continue to rent out the portion then you will not be allowed to exclude the depreciation on that portion.
About 80% of the house' value is due to remoddeling, reconditioning. Does thta get included in basis or is it only based on purchase price?
You will use the basis of the giver and this will include capital improvements also.
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Good to know!