help!!! newbie with mistakes already.

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help!!! newbie with mistakes already.

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Member since 2008 · 7 posts · 0 votes

hello everyone! im newbie and learning so much. everyone here is great with the sharing of knowledge. i hope to contribute some in the near future.

i am 21 and purchased my first property at 19. i quit claimed the property to my mom and partner [the person i bought it from got it from the sheriff's sale]. the property was a great deal in 2004, $30K and properties on the block are now selling above $95K. The property I bought was a distressed property on a redeveloping block, but anyways, my question is this::: My partner and I finally finished renovating and plan to flip it in summer 2006.

1. What's the capital gains situation looking like for me? My mother owns a home and continues to live in it 5+ years. My partner does not own a home.

2. Should I quitclaim the property from my mom & partner into an LLC to avoid whatever is to come in the future?

i should probably advise an accountant but i want insight from the pros first. thank you in advance for those who responds
:D

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  • Frank Adams
    Loveland, CO · Member since 2008 · 1k+ posts · 123 votes
    20y

    Well, if I'm reading your post correctly; the capital gains situation for you is MOOT, YOU don't own anything! Your Mom and your partner own it.

    Moving it around to different entities (LLC, etc) doesn't change the tax situation. If you mean you quit claimed it to YOURSELF, your Mom and your partner that's OK. Otherwise unless your Mom wants to pay some taxes I'd have her quit claim her portion back to you.

    If it's ready now, why are you waiting till summer '06 to sell it? That's going to increase your holding costs. If it's ready now, put it on the market NOW.

    You capital gain will be your NET proceeds, minus your ACQUISITION cost, minus your FIX UP COSTS. Your tax, as long as you've owned it one year will be 15%. Congratulations.

    all cash

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  • N/A N/A
    OP
    Member since 2008 · 7 posts · 0 votes
    20y

    thanks for responding all cash. legally and technically i dont own it. i think the word is strawman? im not sure. i bought the project, funded to project and so on. i had no credit in 04 (19 at the time) and my partner had little built up credit, the seller/lender agreed to sell only if i provided someone with credit. im waiting to sell summer of 06 because of the two year mark for capital gains.

    am i interpreting the capital gains all wrong?

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  • N/A N/A
    OP
    Member since 2008 · 7 posts · 0 votes
    20y

    and also.... yes technically and legally, im "MOOT" from the contract, but my mom is simply a name and credit person. she takes no part in the project nor profits. everything gained or loss is all transferred to me and my partner and that includes any capital gain taxes.

    help :D

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  • N/A N/A
    Member since 2008 · 141 posts · 1 vote
    20y

    driven investeen,

    I'm one of the least knowledgeable people on this site, so take everything with a grain of salt - and verify elsewhere... But I think that the capital gains rate you're aiming for only requires 12 months ownership. I think what you're talking about is when you own and occupy a property for 2 years you avoid taxes on $250k - doable every 2 years. Of course there are limitations based on time owned / time occupied in a 5 year period. If it looks as if your mom or partner has been occupying it for the last 2 years, then everyone would benefit from having them sell it to avoid taxes. If you transfer it to your name, you still would have to show 2 years ownership on top of your 2 years occupation. Hope that helps, and you need to verify anything I tell you. Good luck

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