Tax Tip of the Week | No. 410 | You Make The Call - Home Basis

Tax Tip of the Week | June 7, 2017 | No. 410 | You Make The Call - Home Basis

You Make the Call is a monthly format of questions and answers our office faces on a daily basis.  We hope you will find these tips to be a quick and fun read.QUESTION: Albert walks into our office and tells us that he bought a house from his parents. The house is worth $350,000, but his parents only made him pay $200,000. His parents paid $100,000 for this house a few years ago. After making several improvements, their adjusted basis in the home was $150,000 when they sold it to Albert. He did not assume any mortgages on the home. What is Albert’s basis in the home?ANSWER: This is a part gift, part sale. Albert’s parents sold it for $200,000, and they gave him a gift of $150,000 ($350,000 FMV (fair market value) less $200,000 sales price). In a part gift, part sale, Albert’s basis is the greater of the amount he paid for it ($200,000), or his parent’s adjusted basis in the home ($150,000) at the time of transfer. Thus, his basis is $200,000.Please note that the question and answer provided does not take into account all options or circumstances possible.  Call us if you find yourself in a similar situation.You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.Rick Prewitt – the guy behind TTW...until next week.