Sale of Home owned by multiple buyers

[LV44]

3 unrelated people purchase a home and all 3 are on the deed and mortgage.  If the home sells and has a total gain of about $40,000, do the owners evenly report the gain?  For 2 of the owners this is their primary residence but for one of the owners it is a second residence.  All 3 owners lived in the home for more than 2 years.  

[tagteam]

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@LV44 wrote:

If the home sells and has a total gain of about $40,000, do the owners evenly report the gain?

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Generally, the default position is that each person on title as a co-owner shares proceeds from a sale in proportion to their interest (e.g., three people on title defaults to a one-third interest for each).

There could be different language in the deed and/or a separate agreement between the owners, however.

[KNDavis]

Hi LV44,

When a home owned by three unrelated individuals is sold, each owner reports the sale in the proportion of their ownership.  Assuming they own the house with joint tenancy, meaning all owners have equal rights, each person would report 1/3 of the gain.  Since the home is the primary residence for some of the co-owners, those individuals may be able to exclude up to $250K of the gain from taxable income if they meet the other requirements for gain exclusion. 

Thanks for participating in today's Ask The Expert event!

Kimberly, CPA for over 30 years

[tagteam]

Unless otherwise stated on the deed, each titleholder has equal rights if they own the property as tenants in common.