Confused about how this would be taxed? (if house was bought with money donated...)
Let's say someone bought a primary residence for 300k but 100% of the down payment was using money that was donated to the person by their parents and that this donated money was large enough to make an all cash offer on the house (so no mortgage on house).
Let's say this person lived in the house for 2 years as their primary residence but then decided to turn it into a rental property for the next few years. After which time this person no longer wanted to hold onto the property and sells it. I understand there is NO tax on primary residence when sold other than gains in excess of 250k (for singe person). I understand people are taxed only on investment properties.
My question is.... I HOPE only GAINS are taxed if this person were to sell this house (that was turned from a primary residence into a rental prop) as described in above scenario? Because the 300k that was used to buy the house is 100% NOT taxable as it was a family donation (from a parent to child). So it appears that only the gains would be taxed if house is worth more than what it was bought for when it is sold?
Apologies for this newbie question. If anyone can possibly clarify the above it's MUCH appreciated!!