How to handle tax on sale of house given by parents?

New York State

A couple years ago my elderly parents put their winter house in Flordia in my name because of poor health. (They lived in NYS). My mother passed away recently and now my father wants to sell the house in Flordia and use the money to live on or to give to his children. Since it is in my name, I am wondering how to I handle the sale of the house on my taxes? My wife and I both work and itemized every year and already own the house we live in here in NYS. Can I assume the money from the sale of the house is all treated as income for me? Does any of this come under captial gains? Would that the tax burden? Can I income average? The house will sell for about $40k. Should I just put away a few thousand from the sale of the house to pay my increased taxes next year?

The gain from the sale of the house will be income to you. It will be long-term capital gain, and the amount of the gain will be the difference between the sale price and your parents basis at the time of the sale (assuming the fair market value of the house at the time of the gift was more than the basis to your parents), minus the cost of any additions to the property you have made, and minus any depreciation you have taken on the house.

There is no more income averaging, so you should figure the tax on the gain and make an installment of estimated tax in that amount.

Well, your answer addresses what I was wondering but I don't understand. You said the taxable amount would be the selling price minus the basis of my PARENTS. Since the house is in my name I didn't know I could still use THEIR basis for the calculations. I have zero basis in it because I haven't done a thing yet regarding it. Two years ago when they put it in my name, I didn't do anything tax wise. Was I suppose to?

So if the house was bought by my parents for $25k and is sold today for $50k and they put in $5k in improvements, I would claim a profit and income of $20k on my taxes? If so then the only problem I have is trying to find all the records my father has somewhere! He is getting very forgetful and it may take a while to find all the old paperwork. Thanks for your help.

[abezon]

The reason you use their basis is because the house was a gift. As for figuring out the basis, you might try the county property records. Somewhere there should be an excise tax return from when they bought the house listing the selling price. Building permits would help you figure out if they made any improvements & what they were.