Level 3

Question

Parents Gifted House to my client, and he sold it

Forum|Forum|6 years ago
July 15, 2020
12 replies
56 views

I have a client whom he received a house from his elderly parent as a gift. The date of transfer was on November 2018. Then my client sold the house on June 2019 for 200k. The original basis of the house is 30k when his elderly parent bought it in 1975. So will the original basis be carried over to my client at 30k? This mean my client will have 200k - 30k = 170k of capital gain?

I do understand that if my client's elderly parent sold my client the house, then the sale price will be the adjusted basis for my client. But in this case it was transfer the title over to my client's name without any money being involved and I don't think using the FMV of the house on November 2018 as basis is accurate. Could you please give me some thoughts on this?

Thank You

ProSeries Basic

This topic has been closed for replies.

BobKamman

Level 15

Was it originally owned by both parents? You might get stepped-up basis on half (or all, in a community property state).

K

kzaccountingllcAuthor

Level 3

Thank you all for your useful reply and I really appreciate it. I just talked to my client again and the house is owned jointly by my client's elderly parent. The dad passed away in 2009 but the mom is still alive. So in this case will my client be able to get 1/2 of the step up basis of the hose based on 2009 FMV?

Thank you.

qbteachmt

Level 15

When I reread all of this, the terminology is a mix, including plural or not. Let's review:

Dad died in 2009. Mom was JTROS?

Mom gave the house to your client. It is not inherited by your client, so there is no step up in basis in 2018 for your client. That's the problem with this type of transfer.

I sure hope this is not in California.

Don't yell at us; we're volunteers

Just-Lisa-Now-

Intuit Community Champion

If they had died and left the house to the child, then child would get the stepped up basis at the date of death...I always advise my clients not to gift a house, but to die with it and leave it to the person they want to have it.

Unless there is stepped up basis from the other parent passing (as Bob mentioned above), then your original assessment is correct...be sure to take into consideration any capital improvements done to the house during the time mom owned it, that will increase basis and lower the taxable gain.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

qbteachmt

Level 15

Was a gift tax return filed in 2018? If not, you might want to take care of this first.

Don't yell at us; we're volunteers

BobKamman

Level 15

The gift tax return isn't the responsibility of the client. Try to upsell to the parent, and risk opening Pandora's box.

@Just-Lisa-Now- It's interesting that you decided the "parent" is "mom." I'm not a psychic either but I play one on tax message boards, now and then.

Just-Lisa-Now-

Intuit Community Champion

Not sure why I assumed it was Mom...guess I had a 50/50 shot at being right.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

Sign up

Login with SSO

Let's get you signed in

Login with SSO