Posted by Stewart on September 07, 2003 at 21:08:51:
You don’t need to cash out to owe taxes. It is a matter of what you bought it for (plus improvements of course) and what are you getting for it now. If you bought for 100K and it is worth 400K now, but have 1st and 2nd equal to 400K, you have 300k gain (50k taxable if single). Doesn’t matter if you received any cash (unless you roll proceeds into new house that cost as much or more). She currently owns the property now, as it sounds so gains could be an issue. Anyone else know something different? Has been awhile since I have really been involved in taxes.
On the deductions, of course you want to deal with this upfront in the future, but if she really balks and it would be a good deal anyway, figure what she would save in taxes and work something out. One of the things you will want to do is have the address of record changed with the mortgage company so the 1099 goes to you.