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Discussion Starter · #1 ·
I posted this on another forum, and it got more complicated than I understand.
I'm going to call a cpa in the future but just trying to get a SIMPLE ball park on taxes owed.
my mom passed her house to us when she died in 2020. my wife and I both had our names on the title because mom figured it would be easier on everyone when she passed.
the house was used as a rental, we also let the kids live in there basically free.
we are going to rent it again thru a property management but asked their realtor what about just selling it. price came back about at 240k.
So if we sold the house for say 230k and find the house was valued at 200k in Oct of 2020. do we pay capital gains on the 30k?
we live in our own house in tucson. moms house is out of town. we never lived in it, it was willed to us in her will when she passed.
I'm just looking for a simple answer that a 8 year old can understand. our regular taxes is 2 W2s take the standard deduction and our taxes are done. jim
 

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Might be much better off moving into moms house for a year and a day. CPA will tell you for sure.
 

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Discussion Starter · #3 ·
moms house is over a hour away. I should have changed my address while my kids lived there for over a year. jim
 
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I am from Canada so here is how our Government would look at it

You inherited it at a certain Adjusted Cost Base say 200K if there was no Probate Tax on it with the Will
you Rented it so it became a Investment Property that you had to pay Tax on the Net Rental Income
Selling it for 30K more you would then have to include it in Income as a Capital Gain / 15K
and it would then be Taxed with your other Income for the Year
 

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Discussion Starter · #5 ·
actually when we "rented" it to the kids just before and after my mom passed. basically was to have them house sit then property. we did claim the 400 bucks a month we charged them on our taxes. but did deduct the 2000 bucks in taxes and insurance.
Too bad the house isn't a little closer, id just keep some of my stuff there and change my address so I don't have to smog test my cars. jim
 
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The first $500,000 of capitol gains on a house is exempt for a married couple. Since the HOUSE isn't worth $500,000 you owe nothing for capitol gains. For the sale, you usually have a 5% to 7% fee to the realtor and most places you pay 1% Transfer tax. There may be some other SMALL fees depending on where you live. Taxes need to be paid in full as of the transfer date. You don't owe the entire yearly tax, only pro-rated to the day of sale.
 

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You should contact a Tax Accountant because the capital gain has to be calculated and you have unique circumstances due to being "gifted" a portion of the property value prior to the "inheritance" date and subsequently treating the property as a "rental" after the inheritance.

Consequently, determining your basis for use in the capital gains calculation is beyond the scope of us amateurs.
 

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You should contact a Tax Accountant because the capital gain has to be calculated and you have unique circumstances due to being "gifted" a portion of the property value prior to the "inheritance" date and subsequently treating the property as a "rental" after the inheritance.

Consequently, determining your basis for use in the capital gains calculation is beyond the scope of us amateurs.
Plus, the whole rental situation can also hinge on whether or not you calculated depreciation and deducted that or not. If not, it is a simpler situation, but if you did, then it gets a little more complicated.
 

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one tidbit Jim, my car buddy here was depreciating his M-I-Ls home for some reason. Anyway, when you depreciate ANYTHING you lower its cost basis. He got SOCKED by a cap gain tax when he sold it. really torqued him, but that's the rule.
 

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Discussion Starter · #12 ·
we didnt depreciate anything the year it was rented. just took the rent, minus taxes and insurance and paid added the rental income to our income. We weren't trying to get every penny. I think my kids were in there when my mom passed so it really was more a house sitter situation. jim
 
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Renting the house may come back and bite you in the ass. No good deed goes unpunished.
 

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I think the $500K shelter is based on houses you live in (primary home) not investment properties (need to tax to accountant). Furthermore, there will be sales costs of 6%-7% and possible some reductions for maintenance on the inspection which would lower the net to you. Long Term Captial gains tax range from 0% to 20% (depending on your income) plus whatever the state tax might be. I know on stock the value of the stock at time of death is your basis so an investment home would be the same. However, based on the potential deductions above and your income, your tax bill might be small as the gain might be like $10,000 to $15,000 assuming a $230,000 gross price.
 

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The base price of the property is it"s value when you received it, but adjusted for any improvements made since it came in your possession. If you have had it over a year you would be subject to long term capital gains, not short term. As far as your children staying there, any income you got can be offset by taxes and insurance, and expenses you paid to protect the property as well as upkeep etc.I believe the $500,00. exemption is for you and your spouse if you lived there for a specified period.
Did you use your Chevelle "Company truck" to move your children there? It may qualify as an expense! 😀
 

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Discussion Starter · #18 ·
if anyone wants to see actual sort of reasonable home prices, check out some of the listed homes in sierra vista az. almost like looking at homes for sale a few years ago.
We did do a lot of work the last few months and spent around 7500, so we will talk to a cpa this year to see whats deductible. We should have saved all our gas receipts driving down every weekend for 3 months working on the house. jim
 

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Maybe this???


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Selling Property
If you sell property that you receive as a gift, you have to pay taxes on the difference between the original value of the property and the sale price. For example, if your father buys an asset for $50, gives it to you and you sell it for $200, you owe taxes on the $150 capital gain. You can, however, exclude a large amount of the proceeds from a home sale from taxation if you meet certain ownership and use tests. The IRS says that if you used a home as your primary residence for five years, you can exclude $250,000 in capital gains from taxation. The exclusion is $500,000 for married couples, so long as both partners meet the use tests. You can't take the exclusion for a home sale more than once every two years.
 

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Jim I can send you my CPA;s email or # maybe he can help you out. Super sharp guy he will simplify it for you.
That guy has bailed me out of big time issues with irs, FTB, county biz taxes etc. Used to do seminars for H and R
Softspoken older guy who works from home...knows his stuff.

So...what kind of rents or prices are in Sierra Vista? Gotta be better than Hemet...still hot so?
 
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