Today Bob from Greesnboro, NC tells this story “My parents bought our house in 1965 for $50,000. They put their home in my name in 1981, when its value was around $90,000.
We’re selling it this year for $150,000.
My question: Do I pay tax on the difference (profit) between the original purchase price of $50,000 and the 2005 sales price of $150,000? Or the difference between the 1981 value of the home (at the time I “acquired” it for $1 from the parents) and the 2005 sales price of $150,000.
Are there still houses going that cheaply in the US?!
Goodness, a 50 year old shack that hasn’t been maintained in half a century goes for over half a
million dollars in California.
You’re living in a paradise!
Are you living in the house?
If you are, then you pay tax only on the PROFITS above $250,000.
Since even the price is less than that, you’re not going to be paying taxes at all.
Isn’t that wonderful? Enjoy the windfall.
But, for those who want to know what ‘basis’, or tax cost to use in a situation like this, it would be the parents’ purchase price. Plus any improvements. When it comes to gifts you’ve received, your basis is always that of the person who gave you the gift. Also, the purchase date, for tax purposes, will be the date that it was originally purchased by the person who gave it to you.
So parents, when you give your children homes, stocks or other valuables, please be sure to give them the paperwork showing the costs, improvements and purchase date. ,
Naturally, you’ll find answers to all your questions about gift taxes and other tax information, where? At TaxMama.com
- Ask TaxMama :: Where taxes are fun and answers are free
- WomensWallStreet.com :: How Taxing Will Selling My Parents’ Home Be?