Sibling buyout of inherited mortgage-free home and major fire (tax implications)

[dividedsky260]

What is the name of your state (only U.S. law)? Pennsylvania

Hello -
As I prepare for 2011 taxes I'm faced with quite a unique situation:
-Home inherited to sibling and myself, no mortgage, a number of years ago, where I resided, paid all taxes, prepared home with improvements for a potential future buyout from sibling in future years.

-Home destroyed by major fire in 2010, covered by insurance, home rebuilt from ground up in 2011. Still joint 50/50 ownership of home.

-Home purchased from sibling (no loan/bank involved) in mid-2011, leaving myself as sole owner and essentially a first-time homebuyer. Currently live in brand new home. Deed transferred to my name in late 2011 after money given to sibling earlier in the year.

I am unclear as to whether I am considered a first-time homebuyer, if I address this buyout on my taxes since it was a major purchase, or what the tax concerns are in this situation. I don't know if the inherited home or the fact that it was rebuilt after the fire play a role in how I address this. Do I only address this as gains/losses when I plan on selling the home someday? Or is it considered a first-time home buyer as it was a major purchase/investment on my part?

Sorry for the lengthy note - thank you in advance!

 

[LdiJ]

What is the name of your state (only U.S. law)? Pennsylvania

Hello -
As I prepare for 2011 taxes I'm faced with quite a unique situation:
-Home inherited to sibling and myself, no mortgage, a number of years ago, where I resided, paid all taxes, prepared home with improvements for a potential future buyout from sibling in future years.

-Home destroyed by major fire in 2010, covered by insurance, home rebuilt from ground up in 2011. Still joint 50/50 ownership of home.

-Home purchased from sibling (no loan/bank involved) in mid-2011, leaving myself as sole owner and essentially a first-time homebuyer. Currently live in brand new home. Deed transferred to my name in late 2011 after money given to sibling earlier in the year.

I am unclear as to whether I am considered a first-time homebuyer, if I address this buyout on my taxes since it was a major purchase, or what the tax concerns are in this situation. I don't know if the inherited home or the fact that it was rebuilt after the fire play a role in how I address this. Do I only address this as gains/losses when I plan on selling the home someday? Or is it considered a first-time home buyer as it was a major purchase/investment on my part?

Sorry for the lengthy note - thank you in advance!

You deal with it as gains/losses in the future. You are not a first time home buyer in this instance. There also are no first time home buyer credits for 2011 anyway.

 

[dividedsky260]

Thank you!

Thank you for clarifying the tax issue; after posting I did see there is no FTHB for 2011. Also, since building/buying home is new to me and it was unique circumstances, am I able to do anything with the several thousand spent into the homebuilding, or am I restricted to just the energy-type deductions (windows, solar, etc) only for the home?

Thanks once again; much appreciated.

 

[anteater]

...am I able to do anything with the several thousand spent into the homebuilding...

Major improvements would add to your cost basis. So, keep good records of the cost.

That's a bit vague. If you mention some of the big ticket items, maybe the tax gurus can offer more specific answers.

 

[LdiJ]

Thank you for clarifying the tax issue; after posting I did see there is no FTHB for 2011. Also, since building/buying home is new to me and it was unique circumstances, am I able to do anything with the several thousand spent into the homebuilding, or am I restricted to just the energy-type deductions (windows, solar, etc) only for the home?

Thanks once again; much appreciated.

Other than a very limited energy credit for this year, there is nothing about your home expenditures that would impact your taxes. Those expenses simply add to your basis and will reduce any future capital gain. However, since the home is apparently your primary residence, you have a capital gain exclusion anyway.