Two on title down to one? Any Capital gains?

[David Roe]

If two people are on title of a free and clear house. After rehab and refinancing and closing the house is titled into one of the two people at the refinancing. There’s no capital gain shown due to it being a cash out refi right? The removed person have to pay any since they are no longer on title? Anyone done this? I have heard about it just haven’t done it. Any issues?

[Debbie J. Skora]

@David Roe important question: you mentioned you owned the property together in an LLC. How was his name "removed from title" upon closing the refi? Was the property titled in the LLC, and now it is in your name only? If the LLC owned the property and transferred it to you while giving the partner cash, that is not a capital gain because your partner did not sell a capital asset. He basically received a distribution from the LLC, which is taxed differently than a capital gain (and Not 1031 exchangeable either). This is an excellent time to talk to a tax attorney.