All Things Tax

All Things Tax

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Pioneer
Posts: 1
Registered: ‎09-08-2017
Accepted Solution

Taxes on co owned home buyout

Hello,

My aunt and I are co owners of a rental house in California, and she has agreed to buy out my share for $150,000. What forms do I need to fill out when preparing my tax return and how much in taxes can I expect to pay after the sale?

Thank you!
Tax Pro
Posts: 5,723
Registered: ‎02-23-2016

Re: Taxes on co owned home buyout

Hi Jacobsop,

 

 

Welcome to the H&R Block community.

 

Since this is a rental house you will need Form 4797 and Schedule D to report the sale.

 

Your tax liability will depend on your gain from the sale, so you'll need to know your adjusted basis in the property.  Your gain is taxed at either 0%, 15%, or 20% depending on your income level including the gain.  Your adjusted basis is figured by:

PURCHASE PRICE  +  COST OF IMPROVEMENTS  -  DEPRECIATION TAKEN  -  ENERGY & CASUALTY DEDUCTIONS & CREDITS  =  ADJUSTED BASIS

 

Your taxable gain is figured by:

SELLING PRICE  -  SELLING EXPENSES  =  REALIZED AMOUNT  -  ADJUSTED BASIS  =  GAIN ON SALE  +  RECAPTURED DEPRECIATION  =  TAXABLE GAIN

 

In your situation, assuming that your ownership shares in this rental are split 50/50, your basis is equal to 1/2 of the total basis in the property.  This fraction will be either larger or smaller depending on what your share of the property actually is.

 

So as you can see there is quite a bit to this one.  A tax professional can be of assistance with things like home sales so I do recommend that you meet with one when you get ready to complete your tax return.  I can also guide you in the right direction from here as well.

 

If you have any other questions I'll be glad to help.

 

Louis,

Senior Tax Advisor (Tampa, FL)