My 2nd house is my parents' primary residence. If we sell it, can we ask a closing agent to make the check payable solely to my mother to avoid any capital gain tax?

Forum|Forum|7 years ago
June 7, 2019
22 replies
62 views

My mother and I are both on the title of my second house.

I pay all the mortgage on the second house; my parents live there for free.

Although I cannot exclude the profit from my capital gain tax, if my mother files tax jointly, she can excluded up to $500,000, correct? Then, as long as the profit falls under $500,000, can she claim 100% of the profit and me 0%? If so, then all of our capital gain taxes would be $0, right?

Critter

Level 15

What you need to do is get your name off the title before the closing ... talk to a real estate lawyer to get it done.

Justin9Author

Level 2

I don't think getting my name off the title would work. If I file a quitclaim, then it would be considered as a gift, in which case would be taxable over $14,000.

Opus 17

Level 15

Well the alternative is tax fraud.

Justin9Author

Level 2

I am not going to commit a tax fraud.
I searched the web and I cannot find anywhere that the profit must be divided equally. In fact, I found a website that implies that it's up to multiple owners to divide up the profit among themselves. I just want to get a second verification that it is an acceptable practice.

Critter

Level 15

"Gift Tax" is somewhat of a misnomer. Even though a gift tax return may be required, very few people ever actually pay federal gift tax. The purpose of the gift tax return is usually only to document a reduction in the allowable estate tax exemption.

You will have to file a gift tax return to report the gifts, but you will not actually have to pay any gift tax unless you have made gifts totaling over $5.45 million over your lifetime.

A gift tax return is separate from income tax. It does not go on her income tax return. TurboTax cannot be used to prepare a gift tax return.

See <a rel="nofollow" target="_blank" href="https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/The-Gift-Tax-Made-Simple/INF12127.html">https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/The-Gift-Tax-Made-Simple/INF12127.html</a>

Justin9Author

Level 2

Critter#2, thank you for the reference. From a quick glance, it does sound like all I have to do is file a quitclaim on the title. I will read up on it more.

Justin9Author

Level 2

Opus 17, with all due respect, I think you are mistaken. First, there is $14,000 annual gift limit.
Second, please provide a reference where owners must divide up 50-50.

Justin9Author

Level 2

Meanwhile, please see this link: <a rel="nofollow" target="_blank" href="https://www.trulia.com/voices/Home_Selling/If_there_are_multiple_owners_of_a_property_and_we-400587">https://www.trulia.com/voices/Home_Selling/If_there_are_multiple_owners_of_a_property_and_we-400587</a>

According to it, multiple owners can divide up the profit any way they choose.

Justin9Author

Level 2

Opus 17 and Critter #2, thank you both for your advice! You are correct about the lifetime $5.4 million gift exemption.

Also found this that affirms the $5.4 million exemption: <a rel="nofollow" target="_blank" href="https://www.irs.com/articles/7-things-you-should-know-about-gift-tax">https://www.irs.com/articles/7-things-you-should-know-about-gift-tax</a>

Justin9Author

Level 2

Although I can file a quitclaim on the title to address the issue, it would be nicer if I don't have to do anything, and simply ask a closing agent to make the check payable solely to my mother.

Can anyone verify that the 100% profit can go to my mother and 0% to me please?