I am about to receive a gift of property that was once a rental and had depreciation taken by the donor on previous tax returns. Does depreciation recapture affect the transaction on the date of the gift (I.e. basis adjusted for depreciation) or on sale of the property? If I meet the ownership and residency tests will I have to recapture the donor's depreciation and pay taxes?
This is a bit complicated because other considerations include what is the type of property? Auto or house? Was section 179 ever used? What depreciation recapture applies? We are assuming the recapture applies when it may not. Generally, if you ultimately sell the property at a gain then you use the donors basis just before the gift. If a loss you would use the lower of basis or fmv. Since this is a bit more complex than meets the eye, please seek a consultation. Good luck!
Attorney answers to questions are for general purposes only and do not establish an attorney-client relationship. You must seek a consultation.
Essentially, the basis in the property your receive is the basis in the giver. You did not state whether you will use the property, but if you meet the residency requirements, you will be able to exclude $250k ($500k if joint.)
Check this our with your real estate attorney.
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