How Do We Calculate the Taxes on Property We Inherited from Our Mother?
Before she died, our mother put her house in the name of her si...
Read moreAn irrevocable trust is a legal arrangement that generally cannot be easily changed or dissolved once it’s created. If your aunt’s home is held within such a trust, dissolving it to directly transfer the property to you and your wife as a gift can have tax implications.
As you may know, capital gains tax applies when you sell an asset (like a house) for more than what you originally paid for it. The difference between the sale price and the original purchase price (or “basis”) is the capital gain. (Note that the Internal Revenue Service (IRS) allows you to exclude a certain amount of capital gains if you are selling your own primary residence (Section 121 exclusion).)
Here’s a breakdown of how to calculate the capital gains in your scenario. Because this situation involves a gift rather than a sale, you need to use special rules to calculate the capital gain:
Capital gains on gifted property involves understanding your aunt’s basis, the property’s fair market value at the time of the gift, and how these factors play into any future sale.
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Disclaimer: This is not financial or legal advice. The information provided here is for educational purposes and general information only. It is not a substitute for professional advice. Consult with a qualified tax professional, financial advisor, or attorney before making any decisions about your specific situation.
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