sold condo that was given to me, taxes owed?

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cals400ex
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sold condo that was given to me, taxes owed?

Post by cals400ex » Sat Oct 27, 2018 5:59 pm

My parents owned a condo that they gave to me, my brother, and my sister. Me and my sister sold both of our portions to my brother for the market value (we each owned 1/3 of market value). All of these transactions happened in a matter of a few days. Overall, it was a gift to us children that we are all thankful for. I just wasn't able to research the best way to do this transaction for tax purposes, if it mattered. Regardless, am I responsible to report to my accountant at the end of the year and pay taxes on the amount that my portion was sold for? Is there anything else that I can do to minimize taxes that I am responsible for paying? I am not even sure what rate this is taxed at? If I use this money to buy another property in the near future would that make any difference with the taxes? I appreciate any suggestions!
Last edited by cals400ex on Sat Oct 27, 2018 6:48 pm, edited 1 time in total.

Gill
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Re: sold condo that was given to me, taxes owed?

Post by Gill » Sat Oct 27, 2018 6:10 pm

You have a long term capital gain equal to the difference between your sales proceeds and 1/3 the basis (cost) your parents had in the property. Not much you can do to minimize taxes other than to accurately determine your basis.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

GuyInFL
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Re: sold condo that was given to me, taxes owed?

Post by GuyInFL » Sat Oct 27, 2018 6:15 pm

Buying another property in the future will have no impact on your taxes. Something like that used to be the case but went away in 1997.

Gill
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Re: sold condo that was given to me, taxes owed?

Post by Gill » Sat Oct 27, 2018 6:19 pm

GuyInFL wrote:
Sat Oct 27, 2018 6:15 pm
Buying another property in the future will have no impact on your taxes. Something like that used to be the case but went away in 1997.
That related to a personal residence which this is not. I think the OP is talking about a like kind exchange of investment property which this also is not.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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Duckie
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Re: sold condo that was given to me, taxes owed?

Post by Duckie » Sat Oct 27, 2018 6:23 pm

cals400ex wrote:Regardless, am I responsible to report to my accountant at the end of the year and pay taxes on the amount that my portion was sold for?
Yes. Since the condo was a gift you need to find out your parents' cost basis. You will owe taxes on your portion of the sale (50%) minus your portion of the basis (33%). See here and here.
Is there anything else that I can do to minimize taxes that I am responsible for paying?
Too late now.
I am not even sure what rate this is taxed at?
If you had held the property for more than a year you would have paid the long-term capital gains rate, but it reads like you sold sooner than that. You'll pay the short-term rate which is the same as your ordinary income tax rate.
:oops: Correction: You receive your parents' holding period. So you will pay a maximum of 20% capital gains, and more likely 15% (maybe even 0% if your income is low enough).
If I use this money to buy another property in the near future would that make any difference with the taxes?
There is such a thing as a 1031 Exchange, but I doubt your gifted property qualifies.
Last edited by Duckie on Sat Oct 27, 2018 6:39 pm, edited 1 time in total.

Topic Author
cals400ex
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Re: sold condo that was given to me, taxes owed?

Post by cals400ex » Sat Oct 27, 2018 6:24 pm

For determining basis, I would need to factor in what they paid for the property and then subtract any expenses over the years that they owned it? In other words, what goes into determining the basis?

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Watty
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Re: sold condo that was given to me, taxes owed?

Post by Watty » Sat Oct 27, 2018 6:26 pm

One other thing to do is to make sure that the house title was updated to take your name off of the official paperwork. It is not unheard of for families to try to do transactions like this with various quitclaim deeds that might not get filed in a timely manner. In some areas this can be checked online at the counties web site.
Last edited by Watty on Sat Oct 27, 2018 6:26 pm, edited 1 time in total.

Gill
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Re: sold condo that was given to me, taxes owed?

Post by Gill » Sat Oct 27, 2018 6:26 pm

Duckie, Please correct your comment about a short term gain. The parents’ acquisition date will likely make it long term. The OP’s acquisition date is irrelevant.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

gclancer
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Re: sold condo that was given to me, taxes owed?

Post by gclancer » Sat Oct 27, 2018 6:31 pm

Gill wrote:
Sat Oct 27, 2018 6:10 pm
You have a long term capital gain equal to the difference between your sales proceeds and 1/3 the basis (cost) your parents had in the property. Not much you can do to minimize taxes other than to accurately determine your basis.
Gill
+1 pay your long term capital gains tax and say thanks to your parents. The only thing you could do to (potentially) lower your taxes would be to increase 401(k)/Traditional IRA/HSA contributions to lower your taxable income in order to qualify for 0% long term capital gains rate.

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cals400ex
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Re: sold condo that was given to me, taxes owed?

Post by cals400ex » Sat Oct 27, 2018 6:45 pm

I am already maxed out with the 401k this year. I don't have a traditional IRA, but my roth IRA is maxed for the year. I don't have a HSA. To answer the questions with the timeframe: My parents purchased the condo ~20 years ago. This month they gave each child 1/3 of the condo. This month 2/3's of the condo were sold to my brother, so he was the full owner. He then sold the condo to a couple that he was purchasing a farm from. The owners of the farm wanted the condo plus cash for their farm.

For tax purposes, I am currently in the 24% bracket. I am not sure how that will impact what tax I owe on my sold portion of the condo.

I hope this clears up some confusion.

DIFAR31
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Re: sold condo that was given to me, taxes owed?

Post by DIFAR31 » Sat Oct 27, 2018 7:01 pm

cals400ex wrote:
Sat Oct 27, 2018 6:45 pm
For tax purposes, I am currently in the 24% bracket. I am not sure how that will impact what tax I owe on my sold portion of the condo.
It sounds like you'll pay 15% tax on the LTCG from selling your share of the condo.

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David Jay
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Re: sold condo that was given to me, taxes owed?

Post by David Jay » Sat Oct 27, 2018 7:24 pm

cals400ex wrote:
Sat Oct 27, 2018 6:45 pm
I am currently in the 24% bracket.
The 2017 24% tax bracket has become the 22% bracket in 2018. There is no longer a 24% bracket. Neverrr mind.. (confused 24% and 25%)
Last edited by David Jay on Sat Oct 27, 2018 7:45 pm, edited 1 time in total.
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JGoneRiding
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Re: sold condo that was given to me, taxes owed?

Post by JGoneRiding » Sat Oct 27, 2018 7:30 pm

What was the reasoning behind not simply having your parents sell the condo and divide the money? This would have been a lot simpler for tax purposes and most likely cheaper.

Ie more money for the family as a whole.

Maybe a cautionary tale for others

DIFAR31
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Re: sold condo that was given to me, taxes owed?

Post by DIFAR31 » Sat Oct 27, 2018 7:36 pm

David Jay wrote:
Sat Oct 27, 2018 7:24 pm
The 2017 24% tax bracket has become the 22% bracket in 2018. There is no longer a 24% bracket.
There was no 24% tax bracket in 2017, and yes, there is a 24% tax bracket in 2018.

Gill
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Re: sold condo that was given to me, taxes owed?

Post by Gill » Sat Oct 27, 2018 7:47 pm

JGoneRiding wrote:
Sat Oct 27, 2018 7:30 pm
What was the reasoning behind not simply having your parents sell the condo and divide the money? This would have been a lot simpler for tax purposes and most likely cheaper.

Ie more money for the family as a whole.

Maybe a cautionary tale for others
The gain was divided among three taxpayers rather than one. Maybe a significant savings which someone must have calculated.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

Topic Author
cals400ex
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Re: sold condo that was given to me, taxes owed?

Post by cals400ex » Sun Oct 28, 2018 12:45 am

With the tax brackets, I was previously in the 28% and this year I should be in the 24%.

And I’m not sure why the sale was done like it was. I’m

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grabiner
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Re: sold condo that was given to me, taxes owed?

Post by grabiner » Sun Oct 28, 2018 5:33 pm

cals400ex wrote:
Sat Oct 27, 2018 6:24 pm
For determining basis, I would need to factor in what they paid for the property and then subtract any expenses over the years that they owned it? In other words, what goes into determining the basis?
Any improvements to the property are part of the basis; maintenance is not. For example, remodeling the kitchen increases the basis; replacing an old roof with a similar roof does not.
Wiki David Grabiner

bsteiner
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Re: sold condo that was given to me, taxes owed?

Post by bsteiner » Sun Oct 28, 2018 5:50 pm

Watty wrote:
Sat Oct 27, 2018 6:26 pm
One other thing to do is to make sure that the house title was updated to take your name off of the official paperwork. It is not unheard of for families to try to do transactions like this with various quitclaim deeds that might not get filed in a timely manner. In some areas this can be checked online at the counties web site.
Why would someone use a quitclaim deed in a case like this?

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