Sale To Mother, Split Payment, Tax Implications, Please Help?
I am selling my house to my mother. Sale price is 175000. Payoff is 129000. She is going to pay me the difference now. Then payoff the remaining balance when we move into our new home at the end of the year. At that time I will sign the deed over to her. If I understand this right this would not be considered a gift for tax considerations. I also unsedstand that I wont have any capital gains taxes on the sale since I am not making over the 250,000 exclusion. Can someone more knowledgeable please confirm if this is correct?
it seems that you could make the deal part gift, and part sale or all sale.
As for the cap gain exemption, has the house been your primary residence for 2 of the last 5 yrs?
Also look at if there an issue in terms of selling a partial interest (e.g. 50%)
I have been in the house for 5 yrs now.
What is the FMV of the house?
The appraisal value was 175000.
You are correct. The capital gain exclusion on the sale of your primary residence makes your sale tax free. No gift is involved, therefore your mother does not need to file a Gift Tax Return.
Yes you can, however I believe the profit realized on the sale of the corporate owned property will still be income to the corporation and passed back to you and your partner as taxable income.
Best to consult a CPA for specific details.
I am in the process of tracking down the best 1031 atty in orlando area. Thanks.
In order to defer your capital gain taxes via a 1031 exchange you would need to have the corporate entity complete the 1031 exchange.
This is a little over simplified, but you essentially would have two structures that might make sense. One would be to have the corporate entity complete the 1031 exchange so that the corporate entity would sell and buy inside the corporate entity. Each of you could identify the property that you would want to end up owning, but the corporate entity would purchase both properties as part of the 1031 exchange. The corporate entity would need to hold both properties for 12 to 18 months or more so that its 1031 exchange would qualify, and then after that the corporate entity could distribute the two property to each of you as desired.
The second structure would be to distribute the properties out of the corporate entity now to each of you as individual tenants-in-common, but you would both need to hold the properties as rental or investment properties for 12 to 18 months to establish that you had the intent to hold the properties as rental or investment properties before selling and then doing a 1031 exchange (two separate 1031 exchange accounts) as individuals into your own respective properties.
You must consult with an tax attorney or CPA to avoid any taxable issues with the distribution out of the corporate entity such as a liquidating dividend, etc.
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Yes, this can be accomplished, but it depends on how the values work out. For example, if the rental property sells for $250K and you buy a duplex for $500K, then the rental property value of $250K can be allocated to 1/2 of the duplex as rental property and none of your capital gain would be taxable because you traded up in value and the increased value is allocated to your primary residence. If you sold for $500K and bought for $500K then you would have a taxable event because only 1/2 of the purchase was rental so 1/2 of your 1031 exchange sales proceeds were converted to non-like-kind property.
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How much did she pay for the property?
How much if anything did she spend on improvements to the property?
Is the property her primary residence?
there has to me a sales price, unless she is giving it to you, and then there would be a gift return/tax due.
The capital gains portion is the difference between the NET selling price, less any appropriate improvement expenses and the purchase price, the amount the seller owes on the property has NOTHING to do with her capital gains.
To make things more exciting for you, make sure your refi company is prepared to respond to the chain of title question that any underwriter will raise.
Personally, I prefer to find above board ways to make money, trying to skirt lending laws and the IRS has a funny way of providing room and board for those intent on defrauding the government!
The seller will have a long term capital gain of $88,000.00, minus any improvements she made to the property. Of course she can use her $250,000.00 exemption if she elects to do so.
I completely agree with NewKiddInTown. The sales price is $800,000. Why would she sell the property to you for $800,000 when it is worth $1MM?
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