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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 14442
Experience:  15years with H & R Block. Divisional leader, Instructor
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My son's mother gave her house to m with the understanding

Customer Question

My son's mother gave her house to him with the understanding that she could continue to live there. The house is a "fixer-upper". My son found a nice mobile home in a senior's only park which his mother likes very much. I can loan my son the money to buy the "mobile" and repair the "fixer" but I'm afraid that when my son sells the repaired "fixer" he may have pay income tax for that entire amount whereas if he mortgaged the "fixer" to cover the cost of this transaction he would only have to pay tax on the cash that he gleans from this transaction. PS. Any transactions between me and my son are on a "handshake" basis.
Submitted: 9 months ago.
Category: Tax
Expert:  Robin D. replied 9 months ago.


Your son would have to pay tax on the gain. He starts with the original cost that the mother had and then he adds his costs to repair the property. That is his basis and a loan would not change that.

Getting a mortgage does not reduce his capital gain. As he is being given the property his cost to start is the same as the mother's cost. The additional costs for capital improvements does add to the cost for him.

If he keeps the property for longer than 1 year he can use the lower Capital Gain rates. If sold before that he pays regular rate.

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Expert:  Robin D. replied 9 months ago.

Checking to see if you responded