Originally Posted by dusabrive
I am unmarried and I own (no mtge) and live in one unit of a 3 family house; Although the house is a legal 3 family (with 3 separate units, meters, utility lines etc), I've "never rented" out the other 2 units; I've always occupied the entire house. I plan to sell and buy a one family house. A potential buyer will pay me $1,000,000.00 for the house;
1. How do I go about determining the basis of my home?
2. Assuming the basis is zero, (The house was built in 1931 by my grandfather and has changed hands a few times over the years; Always transferred to another relative, never as part of a will or estate.) What portion of the sale price will I be obligated to pay Capital Gains tax on and what portion is exempt?
3. Would I qualify for a primary residence exclusion?
Since you?ve purchased your home, your starting point for determining the property?s basis is what you paid for it. Logically enough, this is called its cost basis. Your cost basis is the purchase price, plus certain other expenses. You use the full purchase price as your starting point, regardless of how you pay for the property with cash or a loan. If you buy property and take over an existing mortgage, you use the amount you pay for the property, plus the amount that still must be paid on the mortgage. Say, you buys your home for $60K cash and assumes a mortgage of $240k on it. The starting point for determining her basis is $300K.
Certain fees and other expenses you pay when you buy a home are added to your basis in the property. Most of these costs should be listed on the closing statement you receive after escrow on your property closes. However, some may not be listed there, so be sure to check your records to see if you?ve made any other payments that should be added to your property?s basis. These include real estate taxes owed by the seller that you pay, settlement fees and other costs such as title insurance.
2. I do not think its basis is zero; for example,the basis of property inherited from a decedent is generally one of the following:
The fair market value (FMV) of the property on the date of the decedent's death or
The FMV of the property on the alternate valuation date if the executor of the estate chooses to use the alternate valuation..
3.it depends; To qualify for the $250k/$500k home sale exclusion, you must own and occupy the home as your principal residence for at least 2 years before you sell it. Your home can be a house, apartment, condominium, stock-cooperative, or mobile home fixed to land.
If you meet all the requirements for the exclusion, you can take the $250k/$500k exclusion any number of times. But you may not use it more than once every two years.The 2-year rule is really quite generous, since most people live in their home at least that long before they sell it. (On average, Americans move once every seven years.) By wisely using the exclusion, you can buy and sell many homes over the years and avoid any income taxes on your profits.