Capital Gains

[rtamburi]

What is the name of your state? New York, house is in NC
Before my dad had heart bypass surgery last June he transferred the deed to me and my 3 siblings with him having lifetime rights. Current appraisal was for 380,000.00. He subsequently had a stroke and has had to have care. We decided to sell his house in july of this year. We sold it for 550K. we then took the proceeds and bought a 1 floor condo that he could navigate and live for 184,500. Due to family logistics we put the new house in my younger brother and my name. What are the tax consequences for all of us re: Capita gains? How do we pay it? and even though we bought or transferred the deed on June 26th and sold on july 30th do we get a break?
Thanks

 

[anteater]

1) Your father made a gift to you and your siblings. He should file a gift tax return for a gift of roughly $380K, if your appraisal number is correct.

2) You and the siblings take on your father's cost basis.

3) When you and your siblings sold the house, you and the siblings have a capital gain of the difference between your cost basis (essentially your father's cost basis since he gifted it to you) and the net sales price.

4) You pay the gain out of the proceeds from selling the house.

5) Buying the condo does not change this.

 

[rtamburi]

Great, but does owning the house for more than a year give us a tax break and how does that in itself breakdown? Everyone pays his or her portion based upon their own tax bracket?

 

[Snipes5]

No, owning the house more than a year does not give you a break, unless you lived there.

Snipes

 

[rtamburi]

Capital gains

NC
Does it make a difference that when he transferred the title that we didn't have the gift form so we wrote it up as a sell of 25.00 just to make it binding.
His intent was to transfer the deed just in case something went horribly wrong with his surgery.

 

[Snipes5]

No, it makes no difference. For future reference, the way to transfer property in case something goes horribly wrong is with a will. Had you inherited the house, your capital gains would have been almost zero if you sold quickly, and had HE sold the house, he would have been entitled to a $250,000 capital gains exclusion. The way you've done it, you pay capital gains from the first dollar.

Snipes

 

[rtamburi]

capital gains

NC
So what you are telling me is that we will be liable for capital gains tax for 550,000-25.00=549975 split 4 ways and taxed at our individual rates. What about when we bought a new house for him for 184,500. Does reinvestment play into this at all?

 

[anteater]

I am sure that Snipes will correct me if I am wrong..... But the IRS would "look through" the $25 stuff and consider the transfer for what it was -- a gift from your father to you and your siblings. In which case, your cost basis would be your father's cost basis and the capital gain would be the net proceeds less that cost basis.

And, repeat, buying the condo makes no difference.

Since you all did not seek professional advice before doing this, you really should seek it now.

 

[Snipes5]

Anteater is correct. It is as though the house was transferred for $0. You retain your father's basis in the property.

Do a search on this site. People make the mistake of gifting property in this manner every day, and they are all screwed tax-wise for doing it.

Far better to inherit.

Snipes