A client called me today.
He wants to sell his 2nd home in Greece, it is FMV $140,000us.
Home belonged to his father and mother.
Dad and mom bought it many years ago for lets say $1000us.
5 years ago Dad and Mom "added clint to title". He then had an "undivided share in the property"
Then 4 years ago his mother died, then 2 years ago his father died.
There are no other assetts in the estate, only the home.
My client wants to go to Greece this summer and sell the property.
What is his basis???
Can we say that his basis is $140,000us because he was "added to title" merely as a formality and to ease title transition later. And that the "adding his name to title" did not constitute a gift because they could have removed him just as easily?
Do we have to look to Greek law to determine if it was a gift or not?
I guess another approach is to say that his when he was added to title he received a gift of 1/3 the property. Then when mom died, he and dad recieved benifit of stepped up basis on 2/3 of the property, then when dad died my client's basis is at least the same as the 2/3rd's amount that it was worth when mom died.
ie, if it were FMV 130,000 when mom died, 2/3 equals 86,667...Dad and my clients basis on that day was $86,667. Well actually $86,667 plus the original $1000 equals $87,667.
Then 2 years later dad dies, the property is worth $10,000 more, so my clients basis is $87,667 plus $10,000 equal $97,667??
If he sells the property for $140,000 less $20,000 sales costs equals $120,000.
$120,000 less basis of $97,667 equal gain of $22,333.
$22,333 @ 15% capital gains equals $3350 tax on his US 1040.
Anyone have any thoughts on this?
HarveyLucas
He wants to sell his 2nd home in Greece, it is FMV $140,000us.
Home belonged to his father and mother.
Dad and mom bought it many years ago for lets say $1000us.
5 years ago Dad and Mom "added clint to title". He then had an "undivided share in the property"
Then 4 years ago his mother died, then 2 years ago his father died.
There are no other assetts in the estate, only the home.
My client wants to go to Greece this summer and sell the property.
What is his basis???
Can we say that his basis is $140,000us because he was "added to title" merely as a formality and to ease title transition later. And that the "adding his name to title" did not constitute a gift because they could have removed him just as easily?
Do we have to look to Greek law to determine if it was a gift or not?
I guess another approach is to say that his when he was added to title he received a gift of 1/3 the property. Then when mom died, he and dad recieved benifit of stepped up basis on 2/3 of the property, then when dad died my client's basis is at least the same as the 2/3rd's amount that it was worth when mom died.
ie, if it were FMV 130,000 when mom died, 2/3 equals 86,667...Dad and my clients basis on that day was $86,667. Well actually $86,667 plus the original $1000 equals $87,667.
Then 2 years later dad dies, the property is worth $10,000 more, so my clients basis is $87,667 plus $10,000 equal $97,667??
If he sells the property for $140,000 less $20,000 sales costs equals $120,000.
$120,000 less basis of $97,667 equal gain of $22,333.
$22,333 @ 15% capital gains equals $3350 tax on his US 1040.
Anyone have any thoughts on this?
HarveyLucas
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