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Shane-CPA
Shane-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 265
Experience:  Shane Northrop is a Certified Public Accountant, Personal Financial Specialist and a Chartered Global Management Accountant
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Tax bases on house. My mom passed away in October 2012. My

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Tax bases on house. My mom passed away in October 2012. My mom and dd brought the house in 1967 for 19,000. Over the year they put a 2 car garage with heat, workshop and laundry room. Widen the driveway. Heat pump and central air and master bedroom w on suite with walk in closet. The realtor sTated at least 100,000 in updates. When my dad died in 2006 the house was valued at 160,000. A new deed was made with just mom' s name. In April 2012 my mom put my sister and my name on the deed. We r trying to figure out what the bases is in the house. When mom put our name on the deed the property was valued at 139400.
Submitted: 1 year ago.
Category: Tax
Expert:  Shane-CPA replied 1 year ago.

Shane-CPA :

Hello...my name is XXXXX XXXXX I am a Certified Public Accountant. I look forward to assisting you with your tax question.

Shane-CPA :

Per the IRS website...Home acquired from a decedent who died before or after 2010. If you inherited your home from a decedent who died before or after 2010, your basis is the fair market value of the property on the date of the decedent's death (or the later alternate valuation date chosen by the personal representative of the estate). If an estate tax return was filed or required to be filed, the value of the property listed on the estate tax return is your basis. If a federal estate tax return did not have to be filed, your basis in the home is the same as its appraised value at the date of death, for purposes of state inheritance or transmission taxes.

Shane-CPA :

http://www.irs.gov/publications/p523/ar02.html#en_US_2012_publink1000200678

Shane-CPA :

This is an authoritative source and will take the concern out of what other people might have told you...

Shane-CPA :

I hope this helps to answer your question. If you would like additional assistance, please let me know by typing into the chat.

Shane-CPA :

If this answers your question to your complete satisfaction, then I thank you for allowing me to assist you! Please let me know if I can provide you with any assistance in the future. If you are completely satisfied with the service you received, please provide me with positive feedback so I may receive credit for my response. If you feel exceptional service was provided, bonuses are greatly appreciated. Thank you for using Just Answer and I hope you have a great evening!

Customer:

We did not inherit the house, our names were on the deed, so we had new deeds made after my mom passed because the house was ours. Does this make a difference?

Shane-CPA :

okay...there's a little bit of calculation that will need to be done here...

Shane-CPA :

Your mom and dad purchased the house for $19,000....your mom's basis would be 50% of this amount from the beginning

Shane-CPA :

she would then include 50% of all of the upgrades and improvements made to the house up until her husband passed away

Shane-CPA :

Once her husband passed, she would add 50% of the FMV of the home (50% x $160,000) to her basis...through this method she is receiving credit for the basis of her husband

Customer:

so mom's bases would be 58000 when dad died + 80,000. What would be my sister and mine's base then, 138000??

Shane-CPA :

That's correct...because by adding you and your sister's names to the deed she essentially "gifted" you both her share of the house

Customer:

Ah Ok

Shane-CPA :

Does this make sense?

Customer:

Yes

Shane-CPA :

You are receiving a carry over basis of the "gift'

Customer:

Ok

Customer:

so does the one time exemption apply here when my sister and i sell the house? The house has never been on the market

Shane-CPA :

Are you referring to the capital gains exclusion of a sale of a primary residence?

Shane-CPA :

or is there another exemption you are referring to?

Customer:

capital gains of the exclusion when we sale. I am trying to figure out if the house sold for 145000 and my sister and I split, how much capital gains tax is due? Also we are donating alot of the furniture and stuff to Habitat for Humanity so will some of that value ease the tax burden?

Shane-CPA :

Well the donations would be separate from the sale and would be considered a charitable contribution similar to any other charitable contribution you make. In order to benefit from a charitable contribution you would have to itemize your deductions rather than taking the standard deduction which would be included on Schedule A...as far as the capital gains tax treatment...you wouldn't qualify for the Section 121 exclusion because you would have had to meet several requirements in order to not pay capital gains tax on the gain in the sale (one of these requirements is that it must have been your primary residence for at least 2 years out of the past 5 years)...however...the capital gains tax should not be very large when you subtract your basis ($145,000 selling price - $138,000 basis) = $7,000 capital gain...split 50/50...both you and your sister would have a capital gain of only $3,500.

Customer:

Ok thanks

Customer:

You answer all my questions

Shane-CPA :

You're very welcome! Please let me know if I can provide you with any additional assistance in the future.

Customer:

I will thanks

Shane-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 265
Experience: Shane Northrop is a Certified Public Accountant, Personal Financial Specialist and a Chartered Global Management Accountant
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Shane-CPA
Shane-CPA
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Shane Northrop is a Certified Public Accountant, Personal Financial Specialist and a Chartered Global Management Accountant