[rich6947]

My bothers and sisters bought a house from our father for a dollar and sold it with 40,000 profit each. When and how much if you know do we pay for taxes. The house was in mass. But I live in n.h. Thank you:confused: :confused:

[ebaines]

You report the sale of the house sales to the IRS on form 1040 Schedule D. You don't qualify for an exclusion on the sale of the house (you didn't live in as your principal residence). If you sold this house within a year of "purchasing" it, you will owe ordinary income tax on the gain.

Perhaps someone else like AtlantaTaxExpert can address the issue of cost basis for the property, but it seems to me that your "purchase" was essentially a gift from your father, and so your basis is whatever his adjusted basis is, meaning his original purchase price plus costs of major improvements. I would also advise that your father talk with a professional regarding his gift - given the amounts involved he likely owes gift tax on it.

[AtlantaTaxExpert]

Rich:

Your purchase of the house was with a related party, and the IRS looks at such transactions VERY CAREFULLY and with a very cynical view.

As Ebaines inferred, NO ONE sells a house for a dollar. The IRS will correctly reject that purchase and consider the transaction between you and your father to be a gift.

Now, believe it or not, it is likely that NO GIFT TAXES ARE DUE. That is because your father, when he files his gift tax return, can access the Unified Estate Credit to offset any taxes due on this gift. However, your father WILL need to file a gift tax return to properly document and report this gift. He should DEFINITELY consult with a tax professional with experience in gift tax returns. Had he done so to begin with, he would have known NOT to try this stunt.

Do NOT try to file this sale on your Schedule as posted above. The IRS will spot it for what it is and give you all kinds of heartache.