Have a Tax Question? Ask a Tax Expert
Hi and welcome to Just Answer!
As a recipient of a gift - the person does not need to claim it as income. Regardless of the value. Please see for reference IRS publication 525 page 34 (left column)- http://www.irs.gov/pub/irs-pdf/p525.pdf
Gifts and inheritances. Generally, property you receive as a gift, bequest, or inheritance is not included in your income. However, if property you receive this way later produces income such as interest, dividends, or rents, that income is taxable to you. If property is given to a trust and the income from it is paid, credited, or distributed to you, that income is also taxable to you. If the gift, bequest, or inheritance is the income from the property, that income is taxable to you.
tax.justanswer.com/uploads/levr/2007-10-24_192604_inheritance.jpg" alt="graphic" width="100" height="100"/>
The donor (the person who makes a gift) who is an US citizen may be required to file a gift tax return if the value of the gift is above $13,000 per person per year.
If the value of the gift is less than $13,000 per person per year - there is no tax consequences for the donor.
That would be the donor who files form 706 - not recipients of the gift.
Refer to Form 709 , 709 Instructions.There will not be any gift taxes unless the lifetime limit of $5,000,000 is reached.
The basis on gifted property is the lesser of the donor's basis and the fair market value at the time of gifting.
What is your father's basis? that is his purchase price adjusted by improvements and some other expenses.
Thus - if your father's basis is less than current value of the property - your basis is equal to your father's basis.
In case you will use your father's basis - his holding period is also counts - thus - if you sell the property - the gain will be treated as long term capital gain - taxable at reduced rate - not more than 15%.
Let me know if you need any help.