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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 14837
Experience:  15years with H & R Block. Divisional leader, Instructor
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Hello - I have a question for the CPAs online.. I have a

This answer was rated:

Hello - I have a question for the CPAs online..

I have a second home (not an investment home - no rent) that I am selling for $385k. I paid $1 for it. It was given to us from a relative. We have owned the home for 15+/- years. It's my understanding that I will have to pay capital gains since its not an investment and I have no schedule e income/deductions for rent. I made $200k last year. What would my capital gains percentage and amount be?

Robin D. :

Hello and thank you for using Just Answer,
First you really need to start with the correct basis. The tax you would pay will be only on the gain (difference in basis and sale price). Your basis is the same as the person you received the property from not the $1 you showed in the transaction.
As you received it for less than value it was a gift so the basis is the same as their basis. This alone will lessen your gain.

Robin D. :

The rate then will be applied base don your filing status and income bracket.

Robin D. :

If you file jointly you would be in the 28% bracket.



  • 0% applies to long-term gains and dividend income if a person is in the 10% and 15% tax brackets,

  • 15% applies to long-term gains and dividend income if a person is in the 25%, 28%, 33%, or 35% tax brackets, and

  • 20% applies to long-term gains and dividend income if a person is in the 39.6% tax bracket.

Robin D. :

Your capital gains rate would be 15%.

Robin D. :

My goal is to give you excellent service. If you are satisfied, please rate me. If you have follow-up questions on this same topic, use the reply box below. To start a new conversation with me on a new topic request me again.

Customer:

That's great as I was told a much larger number. That said, I don't understand that first point about me being given the property. Can you explain?

Robin D. :

You stated you paid $1 for the property, the IRS does not recognize that as a purchase.

Robin D. :

They see it a sa gift

Robin D. :

as a gift

Robin D. :

sorry

Robin D. :

That means you use the same basis that the giver had. If they paid $50,000 then your basis is $50000

Robin D. :

Not the $1 you used for the transfer of ownership

Customer:

ok, so as a gift - how do I know the basis that the giver had?

Robin D. :

You must ask them

Robin D. :

If you cannot then you will need to do some research

Customer:

it was my mother-in-law - is it based on what the property was worth via the government?

Robin D. :

No, how did your mother in law get the house?

Customer:

husband and wife bought it together in the 70's - after divorce - she took it as a settlement

Robin D. :

Then her basis was half the purchase and then any amounts she paid for improvements while she owned. Is she still around to ask these questions to? If not you can start at the county courthouse for records of transfers.

Robin D. :

You do not want to pay tax on the difference in $385k and $1

Robin D. :

The higher your basis the lower your tax

Robin D. :

I hope this CHAt has at least been helpful as you prepare yourself for the sale.

Customer:

thanks for this information - I have one more question

Robin D. :

Certainly

Customer:

they purchased the place in partnership with another couple - 50/50 - is there anything I need to deal with there?

Customer:

we think it was for $50k total

Customer:

$25k each

Robin D. :

Her basis is whatever she paid but what happened to the other 2 partners (I know divorce got rid of 1)

Robin D. :

Did they buyout the other couple at some time?

Robin D. :

If so then you would add that to the basis.

Customer:

no - our property is 1/2 of a duplex and they still are in their side

Customer:

we're selling now to the other side - they will own the whole property

Robin D. :

Oh ok well then we are just back to the original purchase and if there were any capital improvements (roof,landscaping, fence....)that too would increase the basis

Customer:

even if it were a 2nd home?

Robin D. :

For her?

Robin D. :

Or you?

Customer:

for us

Customer:

we have our primary home and this second home is what the questions are about

Robin D. :

Yes, a second home is not allowed the same exclusion of gain as your main home.

Customer:

so, improvements can't be deducted for us?

Robin D. :

This will be a simple sale of property on Schedule D and the more you can find that can increase the basis the better. Improvements must be capital in nature (not just painting and repairs)

Robin D. :

This would include roof, new HAV

Customer:

correct - we improved by new roof, new deck, new windows, new kitchen, new stairs

Robin D. :

Those are all added to the basis

Customer:

and how do we prove those improvements?

Robin D. :

You keep your reciepts

Customer:

ok - wow - very helpful

Robin D. :

great

Customer:

thanks and if I have any other questions - do I just request robin d?

Robin D. :

Yes you can. Under your My Questions section you can request me again.

Robin D. :

Your positive rating is always thanks enough.

Customer:

'excellent'

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