I was gifted apartments 10 years ago in Los Angeles. I refinanced for $300,000. I now want to sell them?

Question

If I sell them for 600,000 how do I calculate my capital gains tax? What can I do to reduce or eliminate this tax? What will be my net profit?

Answer 1

If someone gave the apartments to you as a gift, your cost basis is the cost basis of the gift giver (what they originally paid for the apartments) plus improvements or any money you gave to the gift giver towards the property, if a partial gift.  And if you depreciated them, there may be depreciation recapture.

So if you were given the property at no cost and cannot account for the original purchase price the gift giver paid, the IRS might figure the capital gain is $600,000.00 (your refi does not count).

It would help a lot if you have or could get a copy of the Form 709 the gift giver filed with the IRS the year they gave you the gift, since that would show "Donor’s adjusted basis of gift"