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topcollector
Level 2

Selling under 2 years...

My brother and I bought a house together because I could not qualify for a mortgage loan. The mortgage is in just my brothers name, but both our names are on the title. The home is my primary home and my brother lives in another city/state. I make the full mortgage payment directly to the bank. I have lived here 18 months but need to sell due to relocating for my employment. I am moving 2200 miles away. From what my research has shown me is that I qualify for a pro-rated exemption 18/24 months that I've lived here, which will cover the total gain from the sale. Since my brother and I are 50/50 owners of the home, does he also qualify for the exemption of his portion of the gain since I have to sell due to the job relocation or will he have to pay cap gain taxes on his portion? I cannot find any information that discusses our specific situation. Any insight would be helpful. 

3 Replies
Opus 17
Level 15

Selling under 2 years...

The capital gains exclusion is only available to someone who both owns the home and lives in it as their main residence. As your brother owns 50% of the property, he will be responsible for capital gains tax on 50% of any gain.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
topcollector
Level 2

Selling under 2 years...

This would apply to him regardless if under or over 2 years, correct? So he will pay cap gains tax no matter what whenever I sell.

Opus 17
Level 15

Selling under 2 years...

The capital gains exclusion only applies to someone who is both an owner and uses the home as their main residence.

 

It might be possible for your brother to give you his half of the house via a quit claim deed, so that you would be the only owner at the time of the sale and you would be responsible for all of the capital gains tax. You could then apply your partial exclusion limit to the gain.  Whether this would be appropriate would depend in part on whether your brother provided any of the funds to purchase the home in the first place or if he was only listed as an owner for purposes of qualifying for a mortgage. I would suggest that you see a real estate attorney before you take any action, and if you have already arranged to use an attorney for the sale, bring this up with them well in advance.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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