A few days before my mother passed away, she signed (gifted) her house over to me. I wasn't ready to sell it or do anything with it. This was my childhood home. I have rented it out the last three years, and I am now ready to sell it. We would like to buy a bigger property, and use the proceeds from the sale of this home for our home. We are asking $179,000, however we think we might get about $160,000. Would I pay capital gains? How much would that be? Any way around it since I am buying a new home to be our personal home?
If you received the home as a gift, you will owe capital gains taxes on the cost basis of the home from when your mother received it. That means that if she bout it for $20,000 you will be taxed for the $140,000 it has gained in value. Unless you lived in the home as your primary residence for at least 2 out of five years, there is not an exception to this. You may want to consider living there for a couple years, because then there is a $500,000 exemption for capital gains if you sell the home.
I am a Massachusetts attorney and answer questions based on Massachusetts law. The above answer is for educational purposes only and does not create an attorney client relationship or constitute legal advice.
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