My father owns my house and plans to do a quitclaim deed so I can sell it and use the proceeds to buy another home. I have lived in it as my primary residence for almost six years.
My question is: Does a quitclaim deed transfer the time of ownership along with the tax basis? The house has gained $200k in value since purchase, and I plan to sell it within a month of the quitclaim deed. Will I be paying short-term or long-term capital gains taxes?
If it’s short-term, it’s not worth having him sell it due to the minimal tax difference compared to the hassle.
The residential exclusion under section 121 is not available until you have BOTH owned AND resided in the house as your primary residence for two of the previous five years, even though the length of time transfers for long-term/short-term treatment of capital gains.
@Anne A gift is a relinquish claim. When you receive a gift, you take on the giver’s holding period. It’s crucial that your father understands that when he files his taxes the next year, he must complete a gift tax return (Form 709). the IRS’s Forms and Publications page (about Form 709)
@Carlena There is a lengthy tale, but in essence, the house’s value is subtracted from my future inheritance; his accountant and attorney took care of it, thus it is truly exempt from gift taxes.
I just don’t have an accountant; I handle both my personal and corporate taxes on my own. Simply put, I was unable to locate the holding time information.
@Anne I’m not arguing he needs to file Form 709 for the gift, but rather that he needs to pay gift tax. The way the value lowers your father’s lifetime gift exclusion amount is by reporting it.