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.
The rate then will be applied base don your filing status and income bracket.
If you file jointly you would be in the 28% bracket.
Your capital gains rate would be 15%.
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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?
You stated you paid $1 for the property, the IRS does not recognize that as a purchase.
They see it a sa gift
as a gift
That means you use the same basis that the giver had. If they paid $50,000 then your basis is $50000
Not the $1 you used for the transfer of ownership
ok, so as a gift - how do I know the basis that the giver had?
You must ask them
If you cannot then you will need to do some research
it was my mother-in-law - is it based on what the property was worth via the government?
No, how did your mother in law get the house?
husband and wife bought it together in the 70's - after divorce - she took it as a settlement
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.
You do not want to pay tax on the difference in $385k and $1
The higher your basis the lower your tax
I hope this CHAt has at least been helpful as you prepare yourself for the sale.
thanks for this information - I have one more question
they purchased the place in partnership with another couple - 50/50 - is there anything I need to deal with there?
we think it was for $50k total
Her basis is whatever she paid but what happened to the other 2 partners (I know divorce got rid of 1)
Did they buyout the other couple at some time?
If so then you would add that to the basis.
no - our property is 1/2 of a duplex and they still are in their side
we're selling now to the other side - they will own the whole property
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
even if it were a 2nd home?
we have our primary home and this second home is what the questions are about
Yes, a second home is not allowed the same exclusion of gain as your main home.
so, improvements can't be deducted for us?
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)
This would include roof, new HAV
correct - we improved by new roof, new deck, new windows, new kitchen, new stairs
Those are all added to the basis
and how do we prove those improvements?
You keep your reciepts
ok - wow - very helpful
thanks and if I have any other questions - do I just request robin d?
Yes you can. Under your My Questions section you can request me again.
Your positive rating is always thanks enough.