# Taxes on the sale of a donated real estate property.



## michel.blanc (Sep 23, 2015)

Hello everyone, 

I'm French and I live in the US with a green card. In 2012, my dad donated me a condo (rental investment) in France at the time valued at 170 kEUR. I paid very little taxes in France because there was a 150 kEUR tax deduction for these types of donations.

Last year, in 2018, I sold the condo for 150 kEUR. Because I sold it for less than what it was valued in 2012, I paid 0 taxes in France. 

Now what about US taxes? What would be the basis, when my dad bought it 20+ years ago or the value in 2012? and how much would I have to pay?

Thank you very much.


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## Bevdeforges (Nov 16, 2007)

This is the information on the IRS website about the basis to use for donated property:
https://www.irs.gov/faqs/capital-ga...e-of-home-etc/property-basis-sale-of-home-etc

It looks like you can use the fair market value of the property as of the date of the gift. In which case, you have a loss on the sale of the property and very possibly no need to report it to the US tax people at all. (Though you may be able to use the capital loss against any other sales of assets you may have this year.)


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## michel.blanc (Sep 23, 2015)

Bevdeforges said:


> This is the information on the IRS website about the basis to use for donated property:
> https://www.irs.gov/faqs/capital-ga...e-of-home-etc/property-basis-sale-of-home-etc
> 
> It looks like you can use the fair market value of the property as of the date of the gift. In which case, you have a loss on the sale of the property and very possibly no need to report it to the US tax people at all. (Though you may be able to use the capital loss against any other sales of assets you may have this year.)


Hello Bev, thank you for the reply. according to your link, the adjusted cost basis would be the price my dad paid for it 40 years ago, which is pretty much zero compared to the FMV. Therefore "If the FMV is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift.". So my basis would be close to zero and I would have to pay 15% taxes, which is $24,000. Is is also explained here, under The Cost Basis of Gift Property for Capital Gains: https://www.thebalance.com/selling-gift-property-3192977

It looks like there is no way around it... and it is disastrous


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## Bevdeforges (Nov 16, 2007)

michel.blanc said:


> Therefore "If the FMV is equal to or greater than the donor's adjusted basis,* your basis is the donor's adjusted basis at the time you received the gift.*". :


from the same website:



> The adjusted cost basis to the donor *just before the donor made the gift to you.*
> The fair market value (FMV) *at the time the donor made the gift.*


Your basis is the donor's adjusted basis AT THE TIME HE MADE THE GIFT. Not the original purchase price. 

Just do the tax return using the FMV at the date of the gift. I take it your father is not a US taxpayer, so it's unlikely he is or was subject to US tax rules, and I gather he paid no gift tax on the gift. 

Use the FMV at the date of the gift to you. Keep whatever documents you have available to back that up - and chances are you'll never have any questions from the IRS on this.


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## michel.blanc (Sep 23, 2015)

Bevdeforges said:


> from the same website:
> 
> 
> 
> ...


I really REALLY wish I could agree with you and save $$$... But it looks like the adjusted cost basis formula is: cost plus improvements, less applicable depreciation, amortization, and depletion (https://www.irs.gov/pub/irs-pdf/p551.pdf). So the only way to increase the basis would be if my dad did enhancements to the condo in the last 40 years, which he didn't.

Also, this website https://www.thebalance.com/selling-gift-property-3192977 gives the following example: "Here's an example. Your parent transfers his $300,000 house to you before his death. He paid $80,000 for it 30 years ago and made $40,000 worth of improvements to it over the years. He never claimed any depreciation on the property. Your cost basis is $120,000—$80,000 plus $40,000. If you sell the property for $300,000, you've realized a $180,000 capital gain. ".


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## Bevdeforges (Nov 16, 2007)

OK, do it your way. But is your father even a US taxpayer? (And I suppose the key thing here is whether or not you've been reporting the income from the property in the years since you've owned it, too.) Things get complicated when you're dealing with an international property transaction.


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## michel.blanc (Sep 23, 2015)

Bevdeforges said:


> OK, do it your way. But is your father even a US taxpayer? (And I suppose the key thing here is whether or not you've been reporting the income from the property in the years since you've owned it, too.) Things get complicated when you're dealing with an international property transaction.


No my father has no ties to the US. I've never reported any income since it hasn't been rented in the last years. What would you recommend?


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## Bevdeforges (Nov 16, 2007)

michel.blanc said:


> No my father has no ties to the US. I've never reported any income since it hasn't been rented in the last years. What would you recommend?


Generally speaking, all that "adjusted basis" stuff relates to the tax status of a property - but given that your father was not a US taxpayer, could well be kind of irrelevant. I would use as your basis the FMV of the property at the date of the gift. If you have never rented it out in the time you've owned it, you could argue that it isn't income producing property. You held it for a period of time and then you sold it (at a loss, from what you've said here). 

File your returns like that and that may well be the end of it.


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