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New Member

Capital Gains on selling house

Asking for a friend. Friend has own house worth $280k and equity of $180k.  Son is going to trial soon and he has at least 10 felony counts. Public defender said the prosecutor will not cut a deal and so son will be locked up for many years.  So is divorced and has no income, and in foreclosure due to 6 months past do. Public Def recommends selling house.  Since he is on drugs the son thinks they wonts take the house.

 

The father knows they will the it. Father had durable power of attorney on son.  The question  is whether to sell house as PoW once the son is incarcerator, or should he do a quit claim deed to transfer house to the father.  In either of these to scenarios is there capital gains or if sold be father in the next couple months it is income? Sone has owned it for maybe 15 years.  Who ends up with the tax burden and who, the son f the father?

 

Thanks

1 Reply
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Level 7

Capital Gains on selling house

First, if the son owns the house and lived in it as his residence, it may qualify for sale of personal residence.  Here is a link to read about that.  If it does qualify, it should be sold as soon as possible to avoid being disqualified.

 

https://www.irs.gov/publications/p523

 

Any possible capital gains is based on difference between purchase price plus any substantial improvements and the selling price less commissions and fees.  That might be excluded from income of the son if it qualifies as sale of personal residence.

 

You mention taking the house by the Government?   Due to drug activity?   I'm not an attorney and not offering legal advice, but if taken and no compensation given, there would be a non-deductible loss.

 

Again, I'm not offering a legal opinion, but you should consider seeking legal advice.  I don't think a quit-claim deed from son to father will help.  In my opinion, that would only tend to push some legal problems onto the father.  And if to be taken by law enforcement, I don't think transfer to a related party will stop it...but that's for an attorney to give advice on.

 

If sold and there is taxable gain, as long as it remains in the son's ownership, any tax burden would be on the son.  Father only has power of attorney and would not have the tax burden unless co-ownership etc., were in place.  POA should not have a tax liability unless malfeasance or misconduct of POA.

 

There are more than tax questions here, and the consultation of legal advice would certainly be in order, in my opinion.

 

 

**Disclaimer: Effort has been made to offer correct information; but due to the discussion forum limitations, the poster disclaims any legal responsibility for the accuracy of the poster's response**