Selling a gifted home in CA

1 : She is a Trustee on the Trust and a Beneficiary too I think...not sure. We've been living in the home here in CA for almost 9 years, and her father just gifted the house out of the Trust name to her last month. It's in my wife's name alone now, not the Trust name. No mtgs on the home to pay off when it sells. We wish to sell it now and keep the money. When it was deeded to her, the value listed on the Grant Deed was $510,000....which was way too low. Realtors are telling us home is worth $565-575K....so we have it listed at $564,900 right now. When we sell the home, what kind of taxes should we expect to pay?

2 : We are trying to avoid using the money to buy another home and are wondering if that's possible. Please help.

Answer :

 1 : I guess the trust is revocable inter vivos trust or a grantor trust; such a trust may be amended or revoked at any time by the person or persons who created it (commonly known as the trustor(s), grantor(s) or settlor(s)) as long as he, she, or they are still competent. A trust grantor can pass on gifts to heirs and beneficiaries. As long as the gifted home is your primary residence, then, as long as you received real property as a gift, consider living in the property for at least two years before selling the property. This will make you eligible for a capital gains exclusion of up to $500K ,as MFJ filer ,on the sale of a primary residence. Capital gains or losses on the property received as a gift are calculated with respect to the original owner's cost basis in the property. In other words, when property is given, the recipient receives both the property and the property's cost basis. The recipient also receives the donor's holding period in the property for determining whether a gain is long-term or short term.

The basis of gift property is the original owner's cost basis, plus or minus any adjustments. Typical adjustments that increase basis are substantial repairs and improvements, along with any expenses for selling the property (such as broker's commissions). Typical adjustments that reduce basis are depreciation the previous owner claimed for renting out the property. The recipient's gain or loss on the gift property will be the selling price minus this adjusted cost basis.For example, say the dj basis of the home is $500K and its FMV is $600K and sell it for $550K, then, its LTCG is $5K;$550K-$500K;however, if the FMV of the home is $550K and its adj basis(OC+other expenses as aid above) is 600K and sold it for $700K , then its LTCG is $100K;$700K-$600K if you sell it for $570K, between $550K and $600K, then no gain or loss. If you sell it for $540K then LTCL is $10K;$550K-$540K.

2 : no problem. It is up to you if you , after sellig the gifted home, buy a new one.

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