Posted by dealmaker on July 24, 2005 at 13:28:07:
His original post said the house is OWNED BY THE IN-LAWS. His basis would be his acquisition cost IF HE BUYS IT, thereby his basis is “stepped-up” from that of the in-laws.
I realize that stepped up has a particular meaning regarding inherited property, I probably should have said “new” basis.
dealmaker
Sell home to minimize capital gains tax - Posted by John B
Posted by John B on July 23, 2005 at 24:01:33:
Need to sell home that is owned by my inlaws, my wife & I have paid the mortgage for 11 years. Would it be easier for us to buy it and pay the capital gains tax, or could my inlaws sell it with out paying or minimizing the capital gains taxes. Which one would be the better of the two.
Re: Sell home to minimize capital gains tax - Posted by seller
Posted by seller on July 27, 2005 at 14:49:29:
The seller - also called the owner - is the one who actually owns the home, not the one who is paying the mortgage or helping out with the sale.
The owner(s) is whoever is named on the Title, not on the mortgage papers. Anybody not on the Title but who is helping pay the mortgage is not officially an owner and has no claim on the property unless there is a separate agreement of some sort in the form of a lien.
It is the seller/owner who must pay capital gains taxes if applicable when the house is sold.
It is the seller/owner who must live in the home for two of five years prior to sale to avoid paying capital gains taxes.
If only your in-laws have their names on the Title they own the house even if you have helped them pay the mortgage for 11 years. If they sell their home to you, they will not need to pay capital gains taxes (unless the home is worth a small fortune) if they have lived there for the last 11 years - or at least 2 years of the 5 years before sale. The price you pay to them for the house will become the “base price” upon which you will base your future appreciation gains and your capital gains taxes upon when you sell the home some time in the future as you will have your name on the Title and be the owner/seller.
Re: Sell home to minimize capital gains tax - Posted by dealmaker
Posted by dealmaker on July 23, 2005 at 08:31:22:
Well you’re a pretty nice guy for helping out the in-laws by paying their mortgage. Let them sell it, unless the gain is over $500K there’s no tax to them. Of course if you buy it you could sell it the next day with no tax due as your basis would be “stepped up”.
dealmaker
Re: Sell home to minimize capital gains tax - Posted by rdlazo
Posted by rdlazo on July 23, 2005 at 07:11:44:
IRS rule is if you live in the property 2
of the last five years your profit is
free from capital gains tax up to $500k
per couple or $250 each person.
You can do this again on the next
house and wait 2 years and then sell.
Thats why we should not be emotionally
attached to the house we are living
in and take advantage of the only tax
free income we can enjoy every two years.
No I am not an accountant.
I’ll be in this house 3 years and will
do it the next few months.
Re: Sell home to minimize capital gains tax - Posted by Dave T
Posted by Dave T on July 24, 2005 at 12:58:06:
dealmaker,
You have got to explain how John can buy the property and “step up” his basis. John’s initial basis is his acquisition cost. If he sells at a higher price, how does he step up his basis for no capital gain?
Re: Sell home to minimize capital gains tax - Posted by Dave T
Posted by Dave T on July 24, 2005 at 13:01:16:
John B left out any information about who is actually occupying the house.