Bill <an_ordinary_guy_158[at]hotmail.com> wrote:
- quote -

Is sale of a _partial_ interest in a primary residence
subject to the allowance?

- quote -

If the payment by B exceeded FMV of the ownership interest B
got, the difference might be considered a gift.

- quote -

I wouldn't think it's exactly critical, provided it's
reasonable; if no paperwork is done until five years later
when the IRS asks about gift taxes, it might be too late.

Seth

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

hburling[at]earthlink.net wrote:

- quote -

It looks to me like this is another of those situations
where someone acted before considering the tax consequences.

We don't know how much gain, if any, B realized on the sale
of house B. If that person lived there for at least the
minimum two years, the gain, up to $250,000, would be tax
free. What use is made of the proceeds is irrelevant.

Person B is not making a gift to A because title is being
changed to a joint ownership. Thus, A must be selling an
interest to B. That would be a taxable gain to A because A
is not giving up his entire interest in the property.

Now, had these people gotten married after the sale of B and
before the change in ownership of A, the tax results would
be quite different. Once married, B's payoff of the
mortgage is a gift to A. Then, As transfer of title to B
could also be considered a gift. Since gifts between spouses
are ignored for tax purposes, there would not be a taxable
gain on the second property.

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

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

whburling[at]earthlink.net wrote:

- quote -

To the extent that A has a realized gain, quite possibly.

- quote -

Actually, A may have a very real gain if the FMV of the
interest sold is greater than A's basis. Without knowing A's
basis in the interest being sold we cannot say for sure
whether A has a "real gain" or a "real loss." Given the
housing market over the past few years I would be surprised
if A does not have a gain.

- quote -

What B does with the proceeds of his home sale is irrelevant
in determining whether he owes tax on any realized gain from
that sale.

- quote -

No. A is selling an interest in her home. The timing of the
various transfers doesn't change that fact.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

whburling[at]earthlink.net posted:

- quote -

No. From your "context," person B received value
(co-ownereship) in return for investment. Unless the
mortgage amount represented a more than $250,000 "gain" for
person A (most unlikely), there are _no_ tax implications.

- quote -

Asked and answered.

- quote -

Presumably, only obligation would be share of ongoing real
estate taxes. No FIT issue, if, as stated, "capital gain has
been 'dealt with'."

- quote -

Pass. Can't see why from my vantage point, but legal minds
may find hidden issues.

Bill

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

context:
two independent people, A and B

Person A owns a house with bank.
Person A lives in house in CT.

Person B owns a house.
Person B lives in house in MA.
Person B sells his home

With house B proceeds, person B pays off mortgage owned by
Person A. Persons A and B eventually create a co-ownership
deed and live in house previously owned by Person A. They
may or may not marry.

Questions:
(1) is the mortgage payoff provided by person b considered
taxable (federal and state)income for person A?

Consider that Person A has no real gain. Person A gives up
sole ownership for the benefit of having mortgage paid off.

(2) is person B obligated to pay any tax given that his
original source of funds was from the sale of his primary
home (assume capital gain tax has been dealt with).

(3) is the timing of mortgage payoff and deed change
critical for tax purposes

(forget concerns about person B protecting his investment).

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >