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Is It Taxable |
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Edith: My father passed away in June and because my mom is in a nursing home, she gifted their house to my sister and I. My sister and her husband then decided to buy my half and we agreed on a selling price of $150,000, or $75,000 to me. They will pay $20,000 down and the rest at interest over 10 years. As part of the paperwork to complete the deal, I was given a 1099-S which lists my gross proceeds as $75,000. I know I will have to pay tax on the interest income, but is the $75,000 taxable in whole or in part? |
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Talk with an accountant. If your cost basis turns out to be less than the price you received, then a certain percentage of the principal payments you receive each year will be taxable as a capital gain. And as you realize, interest received is taxable as ordinary income. When you and your sister received the house as a gift, you took over your mother's cost basis. That is more than the original cost. It also includes anything spent on permanent improvements over the years. It may also have changed (for the better, from your point of view) when your father died. |
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Edith
Originally published on October 16, 2005 |
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