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Capital Gains on Multiple interests inherited over a period
I am trying to understand the calculation of Capital Gains on a South Florida property I now solely own. I gained the 100% interest through rights of survivorship from two other joint tenants who have now passed. The condo is rented out and I have not lived in it and it is owned in an individual capacity.
Here is the detailed information:
A condominium was purchased by Person A on 11/01/1986 for $52,700.
On 11/7/2015, a real property was quit claim deeded by Person A to Person B as a joint tenant with rights of survivorship and Person C as a joint tenant with rights of survivorship.
On 11/17/2020 person A died.
On 01/17/2023 person B died.
Person C (myself) will be selling the real property.
I need to determine what capital gains I owe on interests I held and then the additional stepped up interests I acquired through survivorship.
My analysis is as follows:
The timeline for ownership interests is:
11/01/1986 Person A 100%
11/7/2015 Person A 33.33%, Person B 33.33%, Person C 33.33%
11/17/2020 Person B 50% & Person C 50%
01/17/2023 Person C 100%
The tax implications are:
1. Person A did NOT file form 709 or pay any gift tax for the quit claim deed transfer. Persons B and C did not have to report the gift or pay any gift tax since it was person A's responsibility to do so. There is no past gift tax liability for Persons B or C.
2. On November 17, 2020 person A's remainder interest passed in equal shares to Person B and C.
On January 17, 2023 person B's remainder interests passed to Person C, leaving Person C as the sole owner of the property.
3. Upon the sale of the condominium, the capital gains on Person C's sale would be calculated as follows:
A. 33.33% of the sale price minus the original purchase price to account for the interest acquired via quit claim deed on July 7 2015.
B. 16.66% of the sale price minus the stepped up fair market value on 11/17/2020 as capital gains for the 16.66% remainder interest acquired on 11/17/2020 from Person A.
C. 50% of the sale price minus the stepped up fair market value on 01/17/2023 as capital gains for the 50% remainder interest acquired on 01/17/2023 from Person B.
Total Capital gains would be the sum of items 3A, 3B and 3C above minus any allowed deductions, such as the home sale costs (closing, repairs and so on).
As an individual owned rental property, upon sale the only way to avoid the capital gains would be to do a 1031 exchange and then hold the new property that is purchased for approximately 3 years before selling it.
My question:
1. Can anyone confirm if my analysis of the capital gains above is correct and whether a 1031 is the only means to avoid that capital gains?
a. If my capital gains assumptions are wrong, can you please explain?