About 10 years ago, parents transfered home to their four children for $1. Parents continued to live in house after transfer. Mother died several years ago, dad died last May. Children sold home late last year. Since original transfer was in effect a gift, is the basis to the 4 kids the parent's basis in the home?
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The sale for $1 means it was a gift. Basis equals parent's basis + $1. -
Follow up
After meeting with client, I found out one of the four children had lived with the parents and took care of them. My question concerns whether or not their portion of the gain from sale can be excluded under section 121. On page 6-17, TTB states that taxpayers who own a home jointly with another individual can each exclude gain if they both meet all three conditions. I have read other information that suggests that the gain can be excluded by any of the owners that meet the three tests. Can someone clear this up for me? ThanksComment
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IRS Pub 523, page 4:
"Joint owners not married. If you and a joint owner
other than your spouse sell your jointly owned home, each
of you must figure your own gain or loss according to your
ownership interest in the home. Each of you applies the
rules discussed in this publication on an individual basis."Comment
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The statement "taxpayers who own a home jointly with anotyher individual can each exclude gain from the sale of an interest in the home if each individual meets all three conditions" is a correct statement, but is misleading. It is true, each can exclude gain if each meet all three tests. But if one does not meet all three tests, the other who does can still exclude gain. TTB does not say the one who meets all three tests is disqualified due to the other not meeting all three tests.Comment
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Thanks for clearing that up. I read through Pub 523 and missed that statement. Now that I know this, I just neeed to get my client to refer their sister to me.Comment
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