If I and a partner own a home with a tenant-in-common (tic) agreement and we both live there for two years, and then I buy his share of the deed at the end of these two years, can I turn around and sell the whole house without paying any capital gains tax?
2007-06-03 06:28:26 · 5 answers · asked by alan p 1 in Business & Finance ➔ Taxes ➔ United States
Your basis in the home is your original investment plus what you paid your partner for his share. The gain on the sale is the difference between the selling price and your basis.
As long as you lived in the home for 2 out of the last 5 years (which you did) then you may exclude $250,000 of the gain. The fact that you acquired a share of the home recently does not preclude you from taking the exclusion as long as you lived there for the required amount of time.
2007-06-03 08:53:16 · answer #1 · answered by Anonymous · 1⤊ 1⤋
Tic Agreement
2016-11-10 00:40:02 · answer #2 · answered by ? 4 · 0⤊ 0⤋
Mathew is half correct. The 2 years you live in a home are not required to be the same 2 years you own the hove to qualify for the exclusion. On the other hand, the IRS would probably argue you did not own your partner's half for the required 2 years. I would have to check the law about the legal status of tenants-in-common.
2007-06-03 13:21:04 · answer #3 · answered by STEVEN F 7 · 0⤊ 0⤋
Your gain on the house has two parts:
1. One-half the selling price minus one-half the basis of the house.
2. One-half the selling price minus what you paid for the other owner's half.
The first part is your gain on the sale of a principal residence for which you can get the exclusion of $250K.
The second part is capital gain, unless you have lived in the home for two years after you took full ownership of it.
If you sell it shortly after buying out the other tenant, then the second part of the gain may be little or nothing. Otherwise, you will owe ordinary income tax on this gain since it is short-term.
The other owner was eligible to take his exclusion when he sold it to you; you cannot turn around and take another exclusion for the exact same property, unless you own it for two more years.
2007-06-03 19:17:39 · answer #4 · answered by ninasgramma 7 · 1⤊ 1⤋
The IRS could make the argument that the portion that you bought recently has not been lived in for the required years since you gained ownership of that portion. If you claim the entire thing the likelihood of that challenge is rather remote.
2007-06-03 11:33:05 · answer #5 · answered by ? 6 · 0⤊ 0⤋