"Seth Breidbart" <sethb[at]panix.com> wrote:
- quote -

They still won't have two years of living in it.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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Lanny K Williams CPA <lanny[at]expatriatetax.net> wrote:
- quote -

If they could afford not to take out the cash for a while,
they could rent it out for a couple of years and then sell.
The two years of ownership and the two years of occupancy
don't have to coincide.

(I don't know the rules about whether a forward sale,
locking in the price now but not closing for two years, will
satisfy the requirement.)

Seth

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Multiple people making a business investment is considered a
defacto "partnership" in most states. Unless you have a
written contract or complete paper trail showing unequal
participation, your defacto partnership assume "equal
shares" under most state laws, and your net and tax
obligations likewise. That is why I always recommend writing
a partnership contract when substantial funds are involved.
(Usually te complications of partnership involve unexpected
early dissolution and resulting complications.)

Its the glass-half-full-half-empty situation. Even though
you may pay more tax than you'd like, you are making more
money than you imagined. Focus on the latter.

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"Harry B." <harry_boscoe[at]hotmail.com> wrote:
- quote -

Yes, even if the amount of the "interest" is illegal and
usurious, it can be treated as deductible. At least I think
so.

- quote -

While she is not on title, she does have an equitable
interest in the property, since her profit will be based on
its full value. Personally I think the easiest way to handle
it is to say the kids held half the property in trust for
the mother. On sale she's treated as owner of half the
profit. If any other approach is used, I'd imagine the IRS
might be skeptical about the size of the deduction for the
payment to her.

Stu

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Wayne Brasch wrote:
- quote -

Well, yes, is they lived in the house that long. But, since
they are selling now, after buying the house three months
ago, this rule doesn't apply. Not only that, but it will be
a short-term gain, not long-term!

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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We are aware of that provision and hae used it on previous
sales. However this will be owned 5 to 6 months tops. Once
again what we have here is an informal Equity sharing
situation that we would like to formalize before we sell

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yes I know it will be a short term gain, hey a short term
gain is better than no gain at all our alternative was
renting,

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Wayne Brasch wrote:
- quote -

I had a situation very much like this a while ago, and did
what research I could to determine how it should be
reported. Turns out, the mother should be treated as
*lending* you the money to buy the house, and she'll have
*interest income* for the amount she receives that exceeds
what she *lent* you. I think that would be her share of the
"profit". You may or may not have a corresponding interest
deduction (I doubt that you will) depending on whether her
loan to you was secured by your residence.

This sounds strange, but think about it: your mother-in-law
never had an ownership interest in the house, and there's no
*requirement* that interest be a fixed annual percentage, or
even *any* annual percentage. The interest on her loan to
you was one-half of the profit on the house; it's not a gain
from the sale, as she never owned, and didn't sell, anything

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<phxflyer321[at]yahoo.com> wrote:

- quote -

I'm presuming you and your Wife file jointly when I say
this, but you don't even have to report the sale of a
personal residence on your return as long as you have lived
in it for 2 of the past 5 years and the profit from the sale
is no more than $500,000.

Wayne Brasch

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You refer to "capital gain" - maybe you're not [yet] aware
that the gain will be short-term capital gain?

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I need some advice on capital gain issue I have.

We purchased a home in May 2005 for $235,000 my mother in
law invested the 20% downpayment and we agreed to a 50/50
split of the profits (or loss) when we sell, but because she
is out of state and not available she does not currently
appear on any of the paper work. We currently pay the
mortgage and reside in the house.

We considered this house a temporary residence and
investment while build another house.

Now that we are getting ready to sell it seems the profit
will be considerable and the capital gains much higher than
we ever imagined.

Question? how can we legally split the profits so she would
pay capital gains taxes at her (lower income) rate and my
wife and I at our higher income rate. the profit would seem
to be $20,000 apiece after selling expenses.

Any other way to handle this situation, we have a couple of
months.

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