We were given a property by my father in 2001 who was doing a 1031 Exchange on an investment property. Once we were given the deed and title of the property a year later, we started using it as a depreciation on our taxes. Now we are thinking of selling the property. We are listing it only 5 or 10,000 more than what we bought it at. What tax issues will we come across once we sell the property?

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    Gifted or sold to you? What was the cost basis when your father gifted it to you? what is the value today? Jul 10, 2014 at 20:27
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    There are far too many details missing here. You were given or gifted an investment property? You rented it out? What was your basis then for depreciation? Jul 10, 2014 at 21:08
  • There are several items that are missing, as mentioned above. What expenses do you incur for updates? Were these all updafes or repairs? I would recommend IRS Pub 527 for investment home updates on deductions... Best of luck on the sale of you home! Chris with realtyiniowa.com
    – CDS
    Mar 2, 2015 at 4:58

1 Answer 1


You bought a rental property in 2001. Hopefully you paid fair value else other issues come into play.

Say you paid $120K. You said you have been taking depreciation, which for residential real estate is taken over 27.5 years, so you are about halfway through. Since you don't depreciate land, you may have taken a total $50K so far.

With no improvements, and no transaction costs, you have $50K in depreciation recapture, taxed at a maximum 25% (or your lower, marginal rate) and a cap gain of the 5-10K you mentioned. Either can be offset by losses you've been carrying forward if you suffered large stock losses at some point.

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