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Author: virvid Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121482  
Subject: Need help with house problem Date: 12/10/2005 8:34 PM
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Probably asking after the fact. WE owned a house we used to live in. Adult son & wife moved in and were to buy the house within year. They were making the mortgage payment. They never did put the house in their name. After 6 years, values went up on real estate. We decided we needed to sell the house & get some $$ ready for retirement. They then claimed we GAVE the house to them ( we didn't). Since it had been 6 years, we are in line to pay capital gains now. Plus, they were demanding $90K to leave the property. We settled on $40,000. We never did depreciate the property and they took the deduction each year. We refinanced so their payment was much less than rent would have been. They are wanting their portion of the payout to be tax-free. It's just a big mess and adult children are not speaking to us at this point. WE have 6 other children and we don't just go around giving away houses. Any ideas from anyone on how to reduce the capital gains on this property which has always been in our name? Thanks.
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Author: pussinboots1 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 81861 of 121482
Subject: Re: Need help with house problem Date: 12/10/2005 10:06 PM
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Except for getting them to leave the premesis, I don't see what the problem is. And, I don't see why you're paying them to leave your house. Maybe you can explain your reasoning?

Puss

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 81862 of 121482
Subject: Re: Need help with house problem Date: 12/10/2005 10:47 PM
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Probably asking after the fact.

Congratulations on winning the Understatement of the Day award.

WE owned a house we used to live in. Adult son & wife moved in and were to buy the house within year. They were making the mortgage payment. They never did put the house in their name.

Considering the fact that they didn't own it, they hardly could. Did you give them any kind of deed?

After 6 years, values went up on real estate. We decided we needed to sell the house & get some $$ ready for retirement. They then claimed we GAVE the house to them ( we didn't).

I'm not a lawyer, but IIRC any transfer of real property must be in writing. "Statute of Frauds" comes to mind, but maybe JAFO will be along to confirm or tell me I'm full of beans.

Since it had been 6 years, we are in line to pay capital gains now.

Possibly. See below.

Plus, they were demanding $90K to leave the property.

I've been demanding winning lottery numbers for years with little result.

We settled on $40,000. We never did depreciate the property and they took the deduction each year. We refinanced so their payment was much less than rent would have been.

Now we're getting into tax law, and I have a question: What the H-E-double hockeysticks have you people been putting on your returns? You've been liable for the mortgage payments, but they've been paying them. That means no one gets a mortgage interest deduction. If they've also been paying the property taxes, no one gets that deduction either.

They are wanting their portion of the payout to be tax-free.

If you haven't figured this out by now, that's their concern, not yours.

It's just a big mess

I spoke too soon. This is the Understatement of the Day.

and adult children are not speaking to us at this point. WE have 6 other children and we don't just go around giving away houses. Any ideas from anyone on how to reduce the capital gains on this property which has always been in our name?

Throw your greedy child & family out, using the law if necessary, and move back in and live there for 2 years before selling it. Otherwise you owe tax on the entire gain.

I'm not going to venture into what you need to do to straighten out any tax problems you may have created during the period they occupied the house. Hire a CPA to review it.

My best advice is for you and spouse to sit down and have serious discussions about what you want to salvage from this mess, including family relationships. No matter what you decide, there's going to be a sizeable "ouch" factor.

Once you've decided, hire a lawyer to get it done.

Phil

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Author: whyohwhyoh Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 81874 of 121482
Subject: Re: Need help with house problem Date: 12/11/2005 8:23 PM
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OP posted on other board with some additional info:

Looks like they already sold the house. At least it appears all the damage and decions are final, just some serious paperwork now.

http://boards.fool.com/Message.asp?mid=23409461

"don't know if this is the right board or not..We owned a house and our adult kids moved in. They were to buy the house for a nominal amount and put the mortgage in their name. IT never happened. The market went sky high 6 years later & we offered them rock bottom price. At this point they said we gave them the house & they wanted all of the equity. They ended up moving, we sold the house, and gave them $40,000. cash which they want tax free. WE now are looking at capital gains since we didn't live there for 2 of last 5 years. The property was in our name and it really wasn't a rental ( maybe it was!)and it was less than a mile from our home so it wasn't a second home. It remained in our name. Do we send the kids a 1099? Any ideas how to avoid all of the capital gains? Kids not speaking to us now! We didn't feel we could quit claim it to them as they were angry with us. Any ideas? Thank-you. "

--
whyohwhyoh

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Author: virvid Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 81876 of 121482
Subject: Re: Need help with house problem Date: 12/11/2005 10:38 PM
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Yes.. house is sold now. Time to figure out the capital gains now. Thanks for the comments.

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 81882 of 121482
Subject: Re: Need help with house problem Date: 12/12/2005 2:18 AM
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Time to figure out the capital gains now.

Piecing together the two posts, I'm still not sure whether you had a not-for-profit rental or a second home (there's no mileage requirement). I'll repeat my advice to consult an accountant.

While you're there, find out what kind of gift tax paperwork you have to do. The $40,000 was a gift from you to them, and the donor bears the gift tax responsibility. There won't be any gift tax due, but you may have to file a return, depending on how the payment was made.

No, you don't send them a 1099. They didn't sell anything, so they have no sale to report, and gifts aren't taxable income.

Phil

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Author: virvid Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 81898 of 121482
Subject: Re: Need help with house problem Date: 12/12/2005 11:54 PM
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Thank you Phil.. I made an appointment with a real estate attorney today. Our son is a CPA and we also have our own CPA and we are getting mixed info so hopefully will straighten out the forms for gifts etc. I was under the impression a 2nd home had to be more than a mile away. We certainly weren't taking any profit out of the house. WE refinanced it twice to keep the payment low for the kids. They were making the mortgage payment most of the time however, we did make the payment a few times. Thank you for your kind reply.

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