Question - 40 year owner now Lease to Own title change - Capital Gains tax required ?

#2 06-14-2004, 06:27 AM

- quote -

> An owner (an aunt) in her 80's had previously inherited a
> house and has owned it and leased it for at least 40 years.
> She inhereted it and would presumably have a zero cost basis
> on the house.

The original basis would have been the fair market value on
the date that she inherited the property. If she has been
leasing the property, then she should have been depreciating
a portion of the cost basis. Therefore, the "building"
portion of the cost basis may be zero, but the "land"
portion should still have some basis.

- quote -

> It was leased with a lease to own agreement,

The tax consequences are based on this agreement. Depending
on how this agreement is worded, it is possible that the
property was sold 18 years ago under an installment sale.
As MTW mentioned, you have to have someone look at the legal
agreement to determine what the tax consequences are.

- quote -

> Would the owner be subject to capital gains taxes upon the
> transfer of title, even though the owner has dutifully paid
> taxes on the lease payments, as they were made, over the
> years of the Lease to Own agreement?

Yes.

- quote -

> And if so, the capital gains tax rate would not be over 15%,
> would it?

Probably.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

#1 06-10-2004, 05:40 PM

MTW" <mtwingcpa[at]yahoo.com> wrote:
- quote -

> J. Bernie J. wrote:

> > Would the owner be subject to capital gains taxes upon the
> > transfer of title, even though the owner has dutifully paid
> > taxes on the lease payments, as they were made, over the
> > years of the Lease to Own agreement?

> Obviously, a "sale" took place at ~some~ point in time. But
> that exact point probably depends on underlying state law.
> The FIRST thing you need to do is seek qualified LEGAL
> advice on this point. Once that is determined, the attendant
> tax consequences should become fairly obvious.

Thanks, MTW. I do welcome further communications on this
question from any and all.

J. Bernie

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

06-09-2004, 06:00 AM

J. Bernie J. wrote:

- quote -

> Would the owner be subject to capital gains taxes upon the
> transfer of title, even though the owner has dutifully paid
> taxes on the lease payments, as they were made, over the
> years of the Lease to Own agreement?

Obviously, a "sale" took place at ~some~ point in time. But
that exact point probably depends on underlying state law.
The FIRST thing you need to do is seek qualified LEGAL
advice on this point. Once that is determined, the attendant
tax consequences should become fairly obvious.

MTW

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

#-1 06-06-2004, 08:04 AM

Humbly presented as a point in question:
An owner (an aunt) in her 80's had previously inherited a
house and has owned it and leased it for at least 40 years.
She inhereted it and would presumably have a zero cost basis
on the house. It was leased with a lease to own agreement,
starting 18 years ago, which now, after 18 years, has
matured at the original (18 years ago) market value and
agreed upon price of $350K. This is fairly straight forward.

The owner has not been the resident during the 18 years. Or
the total 40 years. The Lease to Own title transfer is going
to the paying leaser of the last 18 years. The owner and
leaser are now going to memorialize or finalize the
agreement of the lease to own with transfer of title.

Would the owner be subject to capital gains taxes upon the
transfer of title, even though the owner has dutifully paid
taxes on the lease payments, as they were made, over the
years of the Lease to Own agreement?

And if so, the capital gains tax rate would not be over 15%,
would it?

Thanks,
J. Bernie

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Similar Threads
Thread	Forum	Replies	Last Post
New 15% Capital Gains Rate after 5/5/03 question sk43: I sold my rental property about a month before the capital gains rate dropped to 15% on May 6, 2003. Is there any way or circumstances under which...	Taxes	6	05-27-2004 04:25 AM
Capital Gains/Losses Question Douglas Harrington: I have been referred to this group from misc.invest.stocks... I am 15 years old and opened a brokerage account with my mother as custodian. I...	Taxes	8	05-03-2004 07:59 AM
Capital Gains -- estimated tax question Carolyn: I was browsing through earlier replies and it appears the consensus is -- if you have a one time capital gain during the year, you have to either...	Taxes	4	05-03-2004 07:59 AM
Capital Gains on Inheritance question Therese G. Maddox: I have a question about capital gains on a house that my brother and I received as inheritance from our deceased father. I understand that the...	Taxes	1	10-24-2003 06:11 AM
current capital gains question sligo: What are the laws for short and long term cap gains for tax year 2003? Thank you, Seamus J.. Wilson <<...	Taxes	1	08-11-2003 10:00 AM

Thread Tools
Show Printable Version Email this Page
Display Modes
Linear Mode Switch to Hybrid Mode Switch to Threaded Mode