Publication 523 - Selling Your Home - 2003 Page 7
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31Cooperative apartment. Your basis in the apartment is
for gift tax purposes after reduction for any annual exclu-
usually the cost of your stock in the co-op housing corpora-
sion and marital or charitable deduction that applies to the
tion, which may include your share of a mortgage on the
gift. The net increase in the value of the home is its fair
apartment building.
market value minus the donor’s adjusted basis.
Condominium. To determine your basis in a condomin-
Home received from spouse. You may have received
ium, use the same rules as for any other home.
your home from your spouse or from your former spouse
incident to your divorce.
Basis Other Than Cost
Transfers after July 18, 1984. If you received the
home after July 18, 1984, there was no gain or loss on the
You must use a basis other than cost, such as fair market
transfer. Your basis in this home is generally the same as
value, if you got your home as a gift, from your spouse, as
your spouse’s (or former spouse’s) adjusted basis just
an inheritance, or in a trade. If you got your home in any of
before you received it. This rule applies even if you re-
these ways, see the following discussion that applies to
ceived the home in exchange for cash, the release of
you. If you want to figure your adjusted basis using Work-
marital rights, the assumption of liabilities, or other consid-
sheet 1, see the Worksheet 1 Instructions, later, for help.
eration.
If you owned a home jointly with your spouse and your
Fair market value. Fair market value is the price at which
spouse transferred his or her interest in the home to you,
property would change hands between a willing buyer and
your basis in the half interest received from your spouse is
a willing seller, neither having to buy or sell, and both
generally the same as your spouse’s adjusted basis just
having reasonable knowledge of all necessary facts. Sales
before the transfer. This also applies if your former spouse
of similar property, on or about the same date, may be
transferred his or her interest in the home to you incident to
helpful in figuring the fair market value of the property.
your divorce. Your basis in the half interest you already
Home received as gift. Use the following chart to find the
owned does not change. Your new basis in the home is the
basis of a home you received as a gift.
total of these two amounts.
Transfers before July 19, 1984. If you received your
IF the donor’s
home before July 19, 1984, in exchange for your release of
adjusted basis at
marital rights, your basis in the home is generally its fair
the time of the
market value at the time you received it.
gift was...
THEN your basis is...
More information. For more information on property
more than the fair
the same as the donor’s
market value of
adjusted basis at the time of the
received from a spouse or former spouse, see Property
the home at that
gift.
Settlements in Publication 504.
time
Home received as inheritance. If you inherited your
Exception: If using the donor’s
home, your basis is its fair market value on the date of the
adjusted basis results in a loss
decedent’s death or the later alternate valuation date if that
when you sell the home, you
date was chosen by the personal representative for the
must use the fair market value of
estate. If an estate tax return was filed, the value listed for
the home at the time of the gift
the property generally is your basis. If a federal estate tax
as your basis. If using the fair
market value results in a gain,
return did not have to be filed, your basis in the home is the
you have neither gain nor loss.
same as its appraised value at the date of death for
purposes of state inheritance or transmission taxes.
equal to or less
the smaller of the:
•
than the fair
donor’s adjusted basis, plus
Surviving spouse. If you are a surviving spouse and
market value at
any federal gift tax paid on
you owned your home jointly, your basis in the home will
the time, and you
the gift, or
change. The new basis for the half interest that your
•
received the gift
the home’s fair market value
spouse owned will be one-half of the fair market value on
before 1977
at the time of the gift.
the date of death (or alternate valuation date). The basis in
your half will remain one-half of the adjusted basis deter-
equal to or less
the same as the donor’s
mined previously. Your new basis is the total of these two
than the fair
adjusted basis, plus the part of
amounts.
market value at
any federal gift tax paid that is
the time, and you
due to the net increase in value
Example. Your jointly owned home had an adjusted
received the gift
of the home (explained next).
after 1976
basis of $50,000 on the date of your spouse’s death, and
the fair market value on that date was $100,000. Your new
basis in the home is $75,000 ($25,000 for one-half of the
Part of federal gift tax due to net increase in value.
adjusted basis plus $50,000 for one-half of the fair market
Figure the part of the federal gift tax paid that is due to the
value).
net increase in value of the home by multiplying the total
federal gift tax paid by a fraction. The numerator (top part)
Community property. In community property states
of the fraction is the net increase in the value of the home,
(Arizona, California, Idaho, Louisiana, Nevada, New Mex-
and the denominator (bottom part) is the value of the home
ico, Texas, Washington, and Wisconsin), each spouse is
Page 7
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