Wednesday July 16th - Will Capital Gains Apply? Question: My parents are selling a portion of their primary residence to me. Does the capital gains exclusion apply to the sales? Also, if the capital gain of the portion I purchase does not utilize the full $250,000 exclusion, can they apply the remaining exclusion on their next sale? Answer: There are two issues raised by your question: First, is the sale being made on the basis of full market value? Has the property been appraised? Sales to relatives can set off bells. Second, the residential capital gains write off is as much as $500,000 for married couples who have used the property as a principal residence for two of the past five years. Third, are you buying land or part of the actual house? The answer can make a difference in terms of deductions. Fourth, the IRS you cannot take the residential capital gains write off twice, but your parents may be able to take part now and part later. Before proceeding with the partial sale you're describing, be sure to first get advice from a tax professional such as a CPA, enrolled agent or a tax attorney.

Published: July 16, 2008

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