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Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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Last year I sold a 50% interest in my home to my daughter and

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Last year I sold a 50% interest in my home to my daughter and her spouse. We all reside together in the house but now share 50% ownership on the deed. I sold my 50% share to her for $400,000 with the promise I will sell them the other 50% in a few years when I retire. Do I report the 50% sale now or wait until the sale is complete? What form is used to report such a sale if needed? Assuming a basis of $300,000, would I need to claim a $100,000 capital gain at this time. If I use $100,000 of my $500,000 married exemption now would I be able to use the rest of the $400,000 exemption when we complete the 100% sale of the property in a few years? Is there a separate form to compute and report the basis for a home? I have lived there 32 years and have more than $180,000 in improvements as part of my basis.
Submitted: 5 years ago.
Category: Tax
Expert:  Lev replied 5 years ago.

Hi and welcome to Just Answer!

If you sold part of your property - you need to report that sale transaction in the year the property was sold. Thus if the sale transaction was completed in 2011 - that should be reported on 2011 tax return.

When you will sell the other part of the property - you will report another sale transaction. If you sell part of your property - you need to prorate the basis as attributable to that part.


If you qualify to exclude the gain on the sale of your primary home - you do not need to report that transaction on your tax return - please see for reference IRS publication 523, page 19 -

Do not report the 2011 sale of your main home on your tax return unless:

  • You have a gain and do not qualify to exclude all of it,

  • You have a gain and choose not to exclude it, or

  • You received Form 1099-S.

Otherwise, report the sale on your tax return. Report the sale on line 1 or line 3 of Form 8949 as a short-term or long-term transaction, depending on how long you owned the home. Complete columns (a) and (c) through (f) as you would if you were not claiming the exclusion. Enter the selling price (Worksheet 2, line 1) in column (e) (other than the portion of the selling price allocated to business or rental use). Enter the adjusted basis (Worksheet 2, line 4) in column (f) (other than the portion of the adjusted basis allocated to business or rental use). Enter "H" in column (b) if you are excluding any gain reflected on Form 8949. Include in column (g) as a negative number (in parentheses) the amount of any such excluded gain (and any selling expenses other than those allocated to business or rental use). See the example for column (g) in the Instructions for Schedule D (Form 1040).


If you use exclusion - you generally will not be able to claim another exclusion for two years. Only after two years you will be eligible to claim another exclusion.

See for reference in the same publication page 10:

You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true.

  • You meet the ownership test.

  • You meet the use test.

  • During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home.

Let me know if you need any help.

Customer: replied 5 years ago.
I have not received form 1099-S as of 2/1/12. The partial sale was recorded in Mid-Dec., how long should I wait before knowing if I am going to receive one? Also, since the sale was 50% you say I should prorate the basis. From reading your response it is confusing wether I need to report the sale or not. To date I have not received a 1099-s, and I intend to exclude all of my capital gain. Therefore, you suggest I don't need to report it?
Expert:  Lev replied 5 years ago.

Based on your information - you MAY - but do not have to report the sale of your property because (1) that is your primary home (2) you are eligible to exclude all capital gain (3) the sale was not reported on 1099S


The form 1099S is due by Jan 31 - if you did not received it - it is very unlikely that you will receive that form.

Customer: replied 5 years ago.
LEV, thanks for the advise. I figure I will be audited this year because I am gifting a large amount ($240K) to my daughter and want to be sure my return will stand up to an audit. Therefore, it sounds like I should report the partial sale and my intent to exclude the capital gains I am entitled to. I know there are special forms for gifting and I can exclude up to $1M and not pay gift tax and that is what I intend to do. I do my own taxes and have for the last 40 years. I've never been audited and figure this is my year. Is my understanding of the gift exclusion seem right to you?
Expert:  Lev replied 5 years ago.
The gift is not a taxable income in the US - regardless of the value and regardless of the relation between the donor and the recipient - please see for reference the IRS publication 525 page 34 -


Generally, property or the money someone receives as a gift, bequest, or inheritance is not included into income.


For gift tax purposes...

The donor (the person who makes a gift) who is an US person may be required to file a gift tax return if the value of the gift is above $13,000 per person per year. There will not be any gift taxes unless the lifetime limit of $5,000,000 is reached - that amount was increased not long ago.

So - your daughter does not need to report the gift if it is less than $13,000 but if you gifted more than $13,000 you are required to file a gift tax return but most likely
will not be liable for gift taxes.- you should file gift tax return - form 709 -

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