Capital gains taxes when selling joint property?

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alpaca1
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Capital gains taxes when selling joint property?

Post by alpaca1 » Mon Feb 12, 2018 10:45 am

Hello, I own a property that is owned joint between me and my mother which we are looking to sell soon.

My concern is that she would be hit with capital gains taxes on the proceeds of the home because she meets the ownership test, but not the use test, as she has not lived for 2 out of the past 5 years in that home.

The link I am referring to is here: https://www.irs.gov/taxtopics/tc701

However, I did hear that at the settlement table, the proceeds of the sale of the property can actually be sent 100% to me, rather than a 50/50 split. If the full proceeds are given to me (and kept by me), can she avoid the tax situation altogether?

As far as I know I meet both the ownership and use test requirements.

Thank you.

clydewolf
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Re: Capital gains taxes when selling joint property?

Post by clydewolf » Mon Feb 12, 2018 11:23 am

Checkout IRS Pub 523, Selling Your Home. There are some exemptions to the 24 month live-in rule.
https://www.irs.gov/pub/irs-pdf/p523.pdf

alpaca1
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Re: Capital gains taxes when selling joint property?

Post by alpaca1 » Mon Feb 12, 2018 11:42 am

clydewolf wrote:
Mon Feb 12, 2018 11:23 am
Checkout IRS Pub 523, Selling Your Home. There are some exemptions to the 24 month live-in rule.
https://www.irs.gov/pub/irs-pdf/p523.pdf
Thanks, I took a look at that and it pretty much reaffirms what I know. She wouldn't qualify for any of the health/catastrophe related stuff.

Perhaps then it might be a good idea to remove her name from the deed to be safe, but I am not sure.

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oldcomputerguy
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Re: Capital gains taxes when selling joint property?

Post by oldcomputerguy » Mon Feb 12, 2018 11:54 am

alpaca1 wrote:
Mon Feb 12, 2018 11:42 am
Perhaps then it might be a good idea to remove her name from the deed to be safe, but I am not sure.
I'm no lawyer, but I believe that in effect will on paper be the same as selling her ownership share to you, which will trigger its own tax consequences. When my mother-in-law put her house in my wife's name some years ago, she had to register it with the county as a sale, and had to show a sale price on the paperwork. Your situation might be different.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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Peter Foley
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Re: Capital gains taxes when selling joint property?

Post by Peter Foley » Mon Feb 12, 2018 6:16 pm

So you own it jointly. Does that mean as joint tenants or tenants-in-common? That may have an impact on the tax situation.

Gill
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Re: Capital gains taxes when selling joint property?

Post by Gill » Mon Feb 12, 2018 7:04 pm

Was it your mother’s property and she added your name to the deed as a joint tenant. If so, it would be 100% taxable to her.
Gill

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