Primardie said:
"In reality, unless you are dealing with someone with a very large potential estate who does a lot of gifting, the gift tax is a non-issue other than the requirement to file the return. (And I often wonder how many people who should be filing a gift tax return actually do it.)"
Anteater,
We filled out the gifting form 709 and sent form to the IRS. Thank you.
I now have a different situation, but it's related to the gifted property. I sold it this last summer. It was valued at $53,500 when it was gifted to me in 2002 by my mother who is still alive. I sold it for $60,000. I was told that I have to treat it like an inheritance and pay the gov't 15 to 20 percent in taxes on the entire amount since I paid nothing for it. This does not sound right and that I had to claim the whole thing as a capital gain. I am so confused
If my mother is still alive am I supposed to treat this as a gift from her or an inheritance? I use taxact to fill out my income tax return and it does not address this situation. Any help will be greatly appreciated.
ARG! I hope you listen better this time than you did the last time.....and stop getting tax advice from whatever source you are currently receiving it.
When property is sold you pay capital gains taxes on the GAIN. The gain is the difference between the selling price and your basis.
In this case, your basis would be the price your mother (or mother and father) paid for the property, plus any improvements made to the property.
So...as an example, lets say that your parents paid 30k for the property plus spent another 10k in improvements. That gives you a basis of 40k. If you sold the property for 60k, then your gain is 20k. You would pay capital gains taxes on 20k......which would be either 5%, 15% or your regular tax bracket, depending on your other taxable income.
If your parents paid 60k for the property and put 10k in improvements into the property, then you would NOT have a capital gain at all....you would have a capital loss.