I live in PA. My husband and I are going to be purchasing my grandmother's house from my mother and uncle who inherited it when my grandmother passed away. We are purchasing it for 75,000 with them giving us a gift of equity of 35000 (Purchase price of $110,000(appraised value of the home)...Will they have to pay capital gain on that? Or will we? If either party does, how much is capital gain tax typically?
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david ingram replies:
If they have just inherited it four months ago and you are buying it now and it has not gone up in value, there would niot be any capital gains tax payable by your mother and uncle,.
If they inherited it two years ago and it has gone down in value since, there will not be any capital gains tax.
If they are giving you $35,000, the rules today are that they can give you up to $12,000 each with no gift tax. therefore, your mother can give you up to $12,000 and your husband up to $12,000 and your uncle can do the same thing so there is no gift tax problem nor is there the need to file a form.
If they inherited it five years ago and it has doubled in value (or any other amount), they can expect to pay 10% capital gains tax on their share of the increase.
The following comes from Kerry Kersetter's very excellent Q & A forum on US tax. I recommend it wholeheartedly and you can find the newsletter uitself at www.taxguru.net.
The following is two days old on his site.
