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  1. #1
    Join Date
    Feb 2014

    Default Capital Gains Liability on a Home Sold by a Nursing Home Resident

    My mom has owned her home for 44 years and used it as her primary residence. She is in a nursing home now and the home needs to be sold. The property has increased in value by six to seven hundred thousand dollars. What will be the tax liability for this gain be if the home is sold before she passes away?

    Many thanks for your thoughts.

  2. #2
    Join Date
    Sep 2010

    Default Re: Capital Gains

    You need to compute the basis. This is her purchase price, plus any capital improvements (as opposed to repairs) put into the house, plus whatever expenses of the sale (fix up immediately before sale, broker commissions) subtracted from the sales price. As long as she has lived there as her primary residence for 24 months out of the 60 months preceding the sale, she can exclude $250,000 of the gain.

    Further, was she always the sole owner of the house? If she had a husband who has passed, some of the basis may have stepped up to the market value at the time of his death.

    Assuming the worst case if there was no capital improvements done nor other adjustment to the basis, a $700,000 gain would have $450,000 taxable. At the long term capital gain tax of $67500. You didn't indicate the state, but there may be tax liability there as well.

  3. #3
    Join Date
    Mar 2013

    Default Re: Capital Gains

    Not trying to be grim here but if you waited to inherit it, your basis would be the fair market value of the property as of the date of her death. If you sold it for that same fair market value there would be no taxable gain for you.

    Although there might be inheritance taxes if you live in a state that has inheritance taxes.

  4. #4
    Join Date
    Sep 2010

    Default Re: Capital Gains

    Doesn't sound like he wants to inherit it. He says she needs the money to pay for her extended care. Of course if he wanted to pay mom's care out of the eventual expectation (no guarantee) of inheriting the house, that might be good advice. This presumes no other debts and that medicare wasn't involved in the nursing care.

  5. #5
    Join Date
    Sep 2005
    Behind a Desk

    Default Re: Capital Gains Liabilty on a Home Sold by a Nursing Home Resident

    It would be sensible for mom, assuming she's mentally competent, to discuss her situation and plans with an estate planning lawyer who assists with Medicaid planning issues. If you're mom's guardian and are thinking of acting on her behalf, it would be sensible for you to discuss your plan with a lawyer who assists with Medicaid and tax planning, lest you act in a way that unnecessarily increases the estate's exposure to claims or increased tax obligations.

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