Back in 1996 my dad asked me to purchase a house for him in my name but he'd pay the bills. Every year for taxes I claim I owe the house and give him the money that is due to him. In 96 the person who did our taxes told us my dad had to put this info. in his tax report since he's the one who actually pays for the house every month and not I. The problem is that HIS tax guy told him I had to put it in my tax report each year and give him the money. Even though it was very frustrating my husband and I did this for six years. My dad sold that house this year and we live in different states and we both go to H&R Block for our taxes and both offices tell us the other party has to claim what he received ($30,000) from selling that house so we're both very frustrated and don't know who's going to claim that money when tax season comes he who actually paid the house or I, the name under which the house is in? As soon as the check came in my name I gave it to him, IT'S NOT MY MONEY!! HELP!!!!
2007-12-25 10:02:56 · 6 answers · asked by Wiser now 3 in Business & Finance ➔ Taxes ➔ United States
He paid directly from his bank account with his checks, I NEVER did. I don't regret helping him out it's just a pain in the neck when tax season comes, we both point fingers at each other thanks to our H&R reps!
2007-12-25 11:14:26 · update #1
Why oh why did you do this? Did your dad have poor credit and you were just helping him out?
You bought the property. Did you pay cash or did you have a mortgage? Did you charge your dad rent?
You say your dad paid the bills? How did he pay the mortgage? the property taxes? Did he pay them directly or did he give you the money and have you pay it?
Here's the problem. In order to deduct mortgage interest and property taxes, you must not only own the property, but you must also be the person who paid the bill. The tax courts have ruled that some arrangements give "equitable ownership" to your dad and if so, he would be the one who would report the deductions for items he paid on his tax return. But no, you claimed the expenses even though apparently shouldn't have and then gifted part of your refund back to your dad. Now that the property is sold, there may be taxes due.
If your dad had clearly owned the property and lived in it, he might be able to exclude the gain. You on the other hand, didn't live there and now owe 15% LTCG. Based on how you've filed so far, the IRS is going to claim it's your income.
2007-12-25 10:29:24 · answer #1 · answered by Anonymous · 2⤊ 0⤋
If th e house was in your name, then you'd be the one who would have to report the sale and, since you didn't live there, pay tax on any gain. If $30K is what he actually received, that doesn't mean that's all gain and taxable.
Technically for the years you/he owned the house, neither of you could legally deduct the mortgage interest and real estate taxes - you couldn't legally because you didn't actually pay them, and he couldn't because since it was in your name he wasn't legally responsible for paying them.
Frankly it seems like by doing what you did, you and your dad ended up creating a financial mess, and very likely will end up paying capital gains tax that wouldn't have been paid if it had been in his name in the first place.
It might be a good idea to take your taxes to a CPA or enrolled agent this year rather than H&R Block. Their advice so far re this house hasn't been exactly good.
2007-12-25 20:52:55 · answer #2 · answered by Judy 7 · 2⤊ 0⤋
You get to pay the income tax on the $30,000. If everything was in your name, there's no way around it. The proceeds from the sale of the property is reported to the IRS, and they will come calling if you don't claim it.
2007-12-25 18:47:32 · answer #3 · answered by acermill 7 · 0⤊ 0⤋
I second the advice to see a CPA, but it will take more than a few minutes. You are both getting bad advice.
You and your dad are not the first to make a mess like this, and you won't be the last.
2007-12-25 18:28:37 · answer #4 · answered by r_kav 4 · 0⤊ 0⤋
If it's your name on the title, then you pay the taxes and you get the tax deduction.
As far as any profit from the house sale, then that is up to the agreement between you and your father. If he was making all the payments, then he should get any windfall as well as bear any loss, it's only fair. However, he should reimburse any expenses you incurred by holding the loan.
2007-12-25 18:10:10 · answer #5 · answered by Dan H 7 · 0⤊ 2⤋
You need advice from someone other that H&R. Buy 15 minutes of advice from a CPA.
2007-12-25 18:06:59 · answer #6 · answered by Anonymous · 0⤊ 0⤋