All Forum Posts by: Jeremy Martin

For anyone interested, I just spoke to a tax professional about my questions (California). I’m sure most of this is well known on this site, but maybe it will help some new people like me.

He said my brother and his wife can do the refi and give the full amount to my wife and I. They would just have to file the gift tax form. If they don’t want to pay the gift tax, they just don’t pay it, but this will lower their lifetime $11.4 million tax free limit on their “estate” by the amount gifted. That’s plan A.

Plan B is they refi and give us our half of the value in chunks over time. $15,000 from each spouse to each spouse for up to $60,000 per calendar year with until it’s all paid out. Would take about 2.5 years from now.

I thought of another concern...

If my brother and his wife apply for the refi and give me the 200k to buy me out, am I not realizing a capital gain? And we’ve all owned for less than a year (October 2018), so would I be subject to the short term capital gains tax?

Ah, that makes sense. Thanks so much for the explanation!

Hello,

My wife and I Co-own a house with my brother and his wife. This house was deeded to us by my grandmother. My brother and his wife currently live in the house. The house is fully paid off.

We’ve been discussing ways to “divide the inheritance” so to speak.

We’ve learned that we can take money out via cash out refinance so my brother and his wife can essentially “buy us out”. We figure we could get a loan for half the value of the house (say about $185,000). My wife and I would then use that money toward buying a house of our own.

My question is this. I understand that this refi cash is normally not taxable income because it’s a loan.

However, if ONLY my brother and his wife apply for the refinance of $185,000 and then ONLY my wife and I take this money for buying our own house, does that mean the money has technically changed hands, and would it now be taxable?

Or, what if we all 4 applied for the refinance (since we all own the house) but only my wife and I are listed as buyers of the new house? Would this variation incur tax liability?

Or... what if we all 4 refinance and we all 4 are buyer on the new house. Do we avoid taxation?

Just trying to understand since I’m worried a lender will not bother to explain this to us and just let it be our problem to discover later on.

Thanks!

Yeah... and I think I just discovered that we pay full income tax if we sell it within one year X_X

Essentially a rental. She bought the house and co-owned with her daughter, my aunt. It was intended to by my aunt's "inheritance" plan of sorts. My aunt would live in the mother in law side and rent out the main portion. My aunt is no longer in the picture and my Grandma's health is declining so she wanted to give us the house both to relieve the burden of caring for it and to help my brother and I get started on our investment plans.

She bought in 2011 for $235k and put in, say, around $20k to partition the mother-in-law portion. A friend of hers rented for a couple years, then left. My brother has rented it for the last 5 or 6 years. The transfer was completed a couple weeks ago.

Current estimate is at $375k

Thanks on #2

Regarding #1, does your answer not contradict this: https://www.irs.gov/faqs/capital-gains-losses-and-...

What am I missing?

Hello,

I’ve been reading up on carry over basis, but I have a specific question I’ve been trying to find the answer to.

My grandmother transferred a house to me and my twin brother. She is still alive, and my father, her son, is also still alive. Do we still receive the carry over basis even though she skipped her son and gifted the property to us, her grandsons?

I’m asking because today my brother was speaking to the County about the transfer record. They asked our relationship to the gifter. They said the house would be reassessed for property taxes because she skipped a generation. My brother thought the person also mentioned “basis”, but he doesn’t recall exactly what they said. He thought they said we don’t get her cost basis, which would obviously be a huge problem.

Thanks

Thanks everyone.

There is no debt on the property. I have a couple questions based on the replies.

1. Wouldn’t keeping the mother in law (at least the 1 room with the kitchenette) be more valuable?

2. Jeff, you mentioned going after a 1,000,000 MFH property. Is that based on a ratio against the sale proceeds?

Got, it. So even if she had sold it herself, she’d still be paying that tax anyway. That makes me feel a little better, and it definitely makes holding on to it worth greater consideration.