Capital Gains and Gift Tax

[Unregistered]

My mother recently added me to the title of our house this year. She moved out 1.5 years ago and I have been paying 75% of the mortgage since. I have been living in this residence for the past 9 years 7 of which were with my mother. I am planning to the sell the house early next year. We purchased the house for 300k and are looking to sell it for 989k. Am I subject to both a gift tax and capital gains tax? If so how much are we looking at. THere is a second mortgage for 100k.

Thanks for your help

[Roland Slugg]

See a lawyer

Dear "Unregistered"

Was it your mother's intent to give you a full or partial interest in the home at the time she added your name to the title? What does the deed say? Some parents add a child's name to the deed only for inheritance ... i.e. probate avoidance purposes, with no intent to transfer equitable ownership at the time. If she did give you an equity interest, then a gift tax return should be filed for the year of that gift. The amount of the gift would be the percentage she gave you multiplied by the net of: The FMV of the home at the time less the existing debt. The proportional share of her basis becomes your basis, increased by the gift tax she paid (or will pay) on the gift, if any.

When the house is sold, you and your mother can each exclude your share of the gain, up to $250k each, if you meet the 2-out-of-5-years rule and other requirements.

[veritas]

I might add that if you are not on the mortgage you can't deduct the interest.

[Primo]

Thanks you guys are great!

The move my mother made, she explained as lateral. From what she says we dont have to file a gift tax, I hope she is correct. If this is the case will we both still be able to deduct 250k each once we sell?

Once the sale is finalized can all the proceeds of the sale go to one person or does it have to be split between the two?

I am looking to purchase another house and invest the rest.

Thanks again.

[veritas]

Dear Primo,

Several things you have mentioned make me somewhat concerned. I don't exactly know what your mom means by a lateral move. The other thing is if you have in fact received a gift your mother is the one who files not you. You also say "we purchased" the house? From what you have described your mom can exclude 250k of gain. I don't know enough to say whether you can also although looking at the fact your were added to the deed this year and you plan on selling next year sounds very doubtful. Have you considered making an appointment with a professional in your area? There maybe someone qualified on this board in your area.

[sea-tax]

Primo I have to agree with Veritas. Please and I mean Please go seek some professional help. It will save you and your mother some very big problems in the future.

[Primo]

Can any of you recommend a cpa/lawyer in the los angeles area?

Thanks again for your help.

[sea-tax]

Can any of you recommend a cpa/lawyer in the los angeles area?

Thanks again for your help.

Ask jainen I think he is from cali so is DTS I think . Maybe they can refer you.

[Bird Legs]

CPA/Lawyer in Cali.

Maybe you could go to the NATP website and click on find a taxpro in the LA area
and call them.
Or do a Google search. CPA /Tax Attorney in LA Ca.

[Jiggers]

EA (Enrolled Agent) in CA

You can also go to the NAEA website for a referral to your zipcode: www.naea.org

[DTS]

Primo

I used to work for a CPA/Attorney, but his office is in San Juan Capistrano, not LA. If this would be good for you, let me know and I'll get his info to you.

Dennis