Q: My aunt sold my brother and me her house for $1.00, some 8 years ago. She is now moving out of state to a relative’s house and we are planning to sell the house. Will we have to pay capital gain tax?
A: The short answer is: Yes. You will have to pay long-term capital gains tax on the difference between the purchase price and the sales price, minus the broker’s commission, transfer stamps, advertising costs, any other costs of sale and the cost of capital improvements you’ve made to the home, like a new roof or new furnace.
If your aunt had held onto the property, and lived in it for 2 of the past 5 years as her primary residence, she would have been able to keep up to $250,000 in profits tax-free. Since the property is essentially an investment property for you and your brother, you’ll have to pay long-term capital gains tax of up to 15 percent plus state tax on the profits.
Please talk to an accountant or your tax preparer for more details.
Published: Dec 9, 2007