[Russll]

My two brothers and I were gifted my mother's home. She is still alive and living in a retirement center. We would like to sell the home, what taxes are we subject to?

[cdad]

You are subject to the federal gift tax and any local taxes that apply. The good news is there is a lifetime defferment before paying taxes on it but you need to file for it. Check the IRS website for instructions.

[ebaines]

There are two things to be aware of: here:

1. Your mother will likely have to file a gift tax return, although she probably won't actually owe any taxes unless the house is valued at more than $1,039,000, and
2. You and your brothers must report capital gains when you sell the property.

Gift tax is the responsibility of the giver of the gift, not the recipient(s). Your mother must file a gift tax form with the IRS, assuming the house is worth more than $39K. This is because the first $13K of gifts in a calendar year to any individual are exempt from gift tax and do not need to be reported, so since the house was gifted to three of you that means the first $39K can be gifted with no gift tax consquence for her. But the difference between the house's fair market value and $39K must be reported. There is a $1M lifetime exclusion on gifts, so as long as the house is worth less than $1,039,000 there are no taxes due at this time (although the form must still be filed). The amount of this gift also counts against the exclusion for estate taxes, so there may be consequences with respect to taxes your mother's estate will owe when she dies.

Your capital gain when you sell the property is the difference between the net proceeds you receive and your cost basis - you divide the gain by 3, and each of you report your third on your tax return. Since this is a gift your cost basis is equal to your mother's cost basis, which is her orignal purchase price plus costs of any capital improvements she has made over the years. Obviously she will have to tell you what those amounts are.

[AtlantaTaxExpert]

You can expect the capital gains to be significant, as I expect that your mother purchaes the house some time prior to 1990.

It would have been better had she sold the house and qualified for the $250,000 capital gains exclusion allowed for the sale of a primary home, then given you the cash. Too late now, but it serves as a warning to our readers that you should talk to tax experts BEFORE making financial decisions, not after.

[cdad]

Since it is possible that this situation is yet unresolved. Would it still be possible to take a different route because it sounds like not everything is a done deal. What's the best option for the OP ?

[AtlantaTaxExpert]

If the title has NOT yet been transferred from your mother to the children, then, yes, you can change course.

Contact a local tax professional to get face-to-face advice on this issue.