How should I take the profit? - Posted by David

import · January 11, 2004, 1:13pm

Posted by E.Eka on January 12, 2004 at 11:13:10:

Everything you said made sense except for the son having to pay tax on the gift. If it’s a rehab it’s most likely subject to ordinary income.

import · January 11, 2004, 1:13pm

Posted by David on January 11, 2004 at 14:13:21:

I rehabbed a house that is in my son’s name. He is selling the house and we are splitting the profits. What is the best way for us to avoid paying too much in taxes? Should he pay the Capital Gains taxes and then give us half the remainder as a gift? How do we avoid paying too much in taxes on profits from the sell of a house?

Thanks, in advance, for your help in this matter.

import · January 12, 2004, 6:51pm

Joyfully - Posted by Tom-FL

Posted by Tom-FL on January 12, 2004 at 19:51:06:

nt

import · January 12, 2004, 9:37am

Re: How should I take the profit? - Posted by E.Eka

Posted by E.Eka on January 12, 2004 at 10:37:51:

I’m not your tax professional, so this is merely my opinion. First and foremost, if you rehab houses and sell them, you do not pay capital gains tax. You are subject to ordinary income tax rates. The gifting part is besides the point because the person who earned the money would have to recognize it as income. That could be you or your son. It all depends on how it’s structured and not necessarily on whose name it’s under. Also, the gift exemption amount is only $11,000 per person, but unless you have a huge estate, you shouldn’t worry too much. Gifts aren’t subject to income tax, but they decrease your estate tax exemption.

import · January 11, 2004, 3:48pm

Re: How should I take the profit? - Posted by Drew-TX

Posted by Drew-TX on January 11, 2004 at 16:48:39:

I’m not 100% positive about this, but I believe:

If your son has owned the house less than a year, the gain is taxed at ordinary income rates.
If your son has owned the house more than a year, the gain gets capital gains tax treatment (20%, I think).
If your son has owned the house for more than 2 years and used it for his primary residence, he pays no tax on the gain – up to a $250,000 cap.

He should sell the house and gift you half of the gain–he may have to pay tax on the gift, but you could split that, and I don’t think it would be much.

Someone needs to confirm this, though–like a tax atty or CPA.

import · January 11, 2004, 1:57pm

Re: How should I take the profit? - Posted by Michele (OR)

Posted by Michele (OR) on January 11, 2004 at 14:57:26:

First you need to tell us about how the house is in his name. Is it his primary residence? Was it his primary? Has he been using it as a rental?