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skyyscraper-inc
Returning Member

My son and and I bought a rental property in 2015 and my son filed schedule E. We sold it in 2016. Can I pay 100% of capital gain tax on it or does he have to?

 
5 Replies
skyyscraper-inc
Returning Member

My son and and I bought a rental property in 2015 and my son filed schedule E. We sold it in 2016. Can I pay 100% of capital gain tax on it or does he have to?

If I paid for the property but my son claimed the rental income and expenses, paid the property taxes, mortgage interest, etc., and I pocketed the gain, I pay tax on gain, right?  I just need to make sure of accurate base since my son's been taking depreciation on the rental property.  Does it sound right?
TaxGuyBill
Level 9

My son and and I bought a rental property in 2015 and my son filed schedule E. We sold it in 2016. Can I pay 100% of capital gain tax on it or does he have to?

In my opinion, because your son claimed the rental income and paid for the rental expenses, he is a part owner and owes part of the capital gain.  However, from what I've read, this highly depends on your State and local laws.  I would recommend a tax professional in your area that specializes in Real Estate.
Carl
Level 15

My son and and I bought a rental property in 2015 and my son filed schedule E. We sold it in 2016. Can I pay 100% of capital gain tax on it or does he have to?

I'd have to agree with TGBill, because "somebody" has to recapture the depreciation and pay taxes on it. Generally, it's the person that took the depreciation. I would "suggest" the person who's been filing the SCH E be the one to report the sale and deal with the taxes. The other person can always reimburse the payer of those taxes out of their pocket. To me, that would be the simpler and easier way to go. Considering it's your son, I'm certain you wouldn't stiff him on this. But do note that depending on the amount of gain, it could potentially put him in a higher tax bracket overall.
But still, I think it's worth the expense of consulting a local tax pro before you do anything.
Carl
Level 15

My son and and I bought a rental property in 2015 and my son filed schedule E. We sold it in 2016. Can I pay 100% of capital gain tax on it or does he have to?

Who actually paid for the property, claimed the rental income and expenses, paid the property taxes, mortgage interest, etc.? Then who actually pocketed the gain? That's who pays tax on the gain.

I was in a similar situation with one of my rental properties. The only reason my parents were on the loan and the deed, was so that I could get the loan. I paid for the property 100%, plus all the property taxes, mortgage payments and interest, and I was the only one to report all this on SCH E. Therefore, upon disposition of the property I am the one to reports the disposition, and I am the one who pays taxes on any taxable gain. While my parents did have a "legal obligation" to pay for the property and it's associated expenses, they never "actually paid" a dime. So I am the one who has to deal with it tax-wise, and not them.

skyyscraper-inc
Returning Member

My son and and I bought a rental property in 2015 and my son filed schedule E. We sold it in 2016. Can I pay 100% of capital gain tax on it or does he have to?

If the father paid for the property, and the son claimed the rental income and expenses, paid the property taxes, mortgage payments, and the father pocked the gain, then, father pays tax on the gain.  Does it sound right?
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