Level 5

Sale of principal residence received as a Gift from a parent

Forum|Forum|1 year ago
March 2, 2025
2 replies
25 views

Friends, Romans, Countrymen (and women) ...lend me your ears....

So I have a client who received a received as a gift, a principal residence from his parents. Shortly thereafter (2 months later) my client sold the property and purchased another home. As the client did not live in the home or own it for 24 months, he does not meet the eligibility test and therefore cannot take the gain exclusion.

At this time I am trying to determine the gain on the sale of the gifted property. To do this I need to determine the basis. Is the basis the FMV at the date of Gift/transfer, the appraisal value, or the parents original basis?

Much thanks for your help on this guys!

PPECPA

BobKamman

Level 15

The basis of a gift is the basis of the donor (the parents). The daughter gets their holding period, too.

P

PPECPAAuthor

Level 5

Thanks Bob!

You've provided responses before and I appreciate it. If the holding period is the same as the parents, and the parents owned the property for 25 years, does that mean my client can assume they meet the eligibility test for the exclusion?

IRonMaN

Level 15

No, they just get to call it a long term gain instead of short term.

Slava Ukraini!

G

getsmarttax88

Level 3

Any gift would be valued at the FMV at the time it was gifted. The parents would likely to be subject to the gift tax as it would also most likely exceed the annual gift tax allowance - not the best way to change ownership in property. You should easily be able to verify this by making a google search.

abctax55

Level 15

@getsmarttax88

Gifts are 'valued' at the basis of the person doing the giving - NOT at FMV. Are you confusing the situation with inheriting???

If there was gift tax incurred I think it can be added to the basis (I think, I vaguely remember somethin' about that... I've never dealt with it.... just know I'd need to research it...)

HumanKind... Be Both

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