Here's the situation. Let's say there's a multi family 4 unit property that is owned by an unmarried couple as joint owners with right of survivorship. They lived in it for two years out of the last 5. They don't live there anymore.
Person #1 makes 50k a year in income and claims head of household, and person #2 makes 100k a year and claims single. Mortgage is only on the name of person #2.
They bought the property for 400k and will sell for 700k, creating 300k in gains.
How do they split the capital gain to pay the least amount of taxes? Do they need to do a 1031 exchange, or is there some way to avoid paying capital gains with this scenario?
They both lived in 25% of the property (1 unit) for 2 years. The other 3 units were rented out. I assume that means 25% of the gains can be tax free, which means we only need to figure out what to do with the other 75% (225k). But how do they split everything? Can one person claim all the gains?
For example, I read that if your income is less than 55k as HOH, you don't pay any capital gains tax. Can person #1 with the 50k income just claim the entire 300k gains and not pay any taxes on it?
