Sale of Rental property with gift equity

Forum|Forum|5 years ago
April 21, 2021
3 replies
16 views

I have a client who has sold a rental property that was never rented and sold it to his son. The Basis of property is 125,560, sale price is 180,000. There were 40,000 in upgrades and repairs to property and the taxpayer used a gift equity of 28,000 at the time of the sale.

The 40,000 is added to the basis to increase the basis correct? The gift equity is the amount of a discount on the sale price and reduce the sales price of the property? The only other cost is closing costs paid by the seller.

I have been researching this and I just need to know that I am in the right thought process for this return.

thanks

ProSeries Professional

This topic has been closed for replies.

Best answer by BobKamman

I would add the gift to selling costs, which on the form comes out looking like another addition to basis, so that the selling price matches what is shown on the 1099-S.

BobKammanAnswer

Level 15

I would add the gift to selling costs, which on the form comes out looking like another addition to basis, so that the selling price matches what is shown on the 1099-S.

J

jeffmcpa2010

Level 10

Let me ask a question to get discussion started.(And to give myself something to cogitate on)

If the Seller gifted the son, $28,000 cash, which the Son paid back as part of the purchase price, what would the sale reporting look like?

Is Transferring the Cash any different than gifting of Equity?

BobKamman

Level 15

@jeffmcpa2010 "Is Transferring the Cash any different than gifting of Equity?"

In the eyes of the mortgage company it is, and they're the only ones who count.

J

jeffmcpa2010

Level 10

In the eyes of the mortgage company it is, and they're the only ones who count.

Them and the IRS.....

T

TaxGuyBill

Level 15

@kabbabkkg wrote:

I have a client who has sold a rental property that was never rented

The 40,000 is added to the basis to increase the basis correct?

The gift equity is the amount of a discount on the sale price and reduce the sales price of the property?

Huh?

Yes.

Yes, but as was mentioned, if there is a 1099-S you may want to shift that amount to selling costs or Basis to avoid an IRS notice.

Sign up

Login with SSO

Let's get you signed in

Login with SSO