Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 08-16-2017, 03:47 PM
Junior Member
 
Join Date: Aug 2017
Posts: 2
capital gains on gifted vacation home

My siblings and I formed a LLC when our parents gifted the family cottage to us. We worked with an attorney to ensure the amounts per member was below the exposure limit for taxes. We recently sold the cottage and as part of the closing a 1099S was filed. My question is around how the IRS will be able to link the fact that this entity was originally gifted to us so we will not be expected to pay capital gains taxes on the proceeds. It should be noted that the closing was naturally done in the name of the LLC (vs. each individual).



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 08-16-2017, 09:35 PM
Moderator
 
Join Date: Oct 2010
Posts: 4,768
The answer to this question really depends on the type of legal entity your business is operated through. Limited Liability Company with Multiple Owners, Taxed as a Partnership is similar to S corps in that the individual items of income and loss are not taxed within the partnership, but are passed through to the individual partners on their Sch K1 s of 1065and taxed on their individual income tax returns on 1040s. Thus, any sale of a house by the partnership would be taxable to the individual partners not the LLC, partnership. If the LLC owned the house for more than 1 year then the gain would be eligible for the long-term capital gains tax rate, which is currently0% ~ 15%



When you sell your home, federal tax law requires lenders or real estate agents to file a Form 1099-S with the IRS and send you a copy if you do not meet IRS requirements for excluding the taxable gain from the sale on your income tax return. Also to avoid violating IRS reporting rules, the lender or agent may send you a 1099-S even if you qualify for the taxable gain exclusion.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #3 (permalink)  
Old 08-17-2017, 08:34 AM
Junior Member
 
Join Date: Aug 2017
Posts: 2
What about the gift fact

Thank you for your response. It makes sense. However, the basis of the question remains unclear. Given the fact that the original ownership was the result of gifting, doesnt that come into significance with regard to capital gains tax exposure?



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #4 (permalink)  
Old 08-17-2017, 10:20 AM
Moderator
 
Join Date: Oct 2010
Posts: 4,768
Quote:
Originally Posted by Wacasama View Post
Thank you for your response. It makes sense. However, the basis of the question remains unclear. Given the fact that the original ownership was the result of gifting, doesnt that come into significance with regard to capital gains tax exposure?
very critical question donot think the gifting comes into significance with regard to CG tax exposure itself;HOWEVER,it does in determining capital gain amount. When the cottage was gifted to you, your income tax basis in the property became the same as the person who made the gift to you ,the donor. since you received it by gift, you need to take the basis of the person who gave you the asset.
To figure the basis of property you receive as a gift, you must know its adjusted basis to the donor just before it was given to you, its FMV at the time it was given to you, and any gift tax paid on it if any but mosty no gift tax imposed. If the FMV of the property was less than the donor's adjusted basis, your basis for gain on its sale or other disposition is the same as the donor's adjusted basis plus or minus any required adjustment to basis during the period you held the property. Your basis for loss on its sale or other disposition is the FMV at the time you received the gift plus or minus any required adjustment to basis during the period you held the property. If the FMV of the property was equal to or greater than the donor's adjusted basis, your basis for gain or loss on its sale or other disposition is the same as the donor's adjusted basis at the time you received the gift. Increase your basis by all or part of the gift tax paid, depending on the date of the gift. So,Once you determine the cost basis as above, You will determine gain ;Your pro-rata share of Amount realized(Sales - Expenses on sales) minus Your pro-rata share of Adjusted cost basis (cost basis determined above plus any cost of improvements to the property etc).
I would assume that the FMV on the date of the gift will be higher than the cost basis of the donor, considering the property prices.
If that's the case than the cost basis will be donors basis + all or part of gift tax paid, if any + improvements made by you after the house was signed over to us and the time of sale.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Home Sale / Capital Gains Tax? dusabrive Capital Gains 1 06-22-2017 07:31 PM
Capital gains tax on home sale fortyniners Capital Gains 3 05-12-2017 05:00 AM
Capital Gains on a gifted primary residence bvirkus Capital Gains 1 10-23-2015 03:33 AM
Capital Gains Tax on Gifted Property Jeremy Caldwell Ohio Capital Gains 5 02-06-2014 04:06 PM
Capital Gains on home sale jpegg Capital Gains 1 02-25-2013 02:35 AM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning