How to Avoid
Taxes on a Sale
Question: We live in a co-op apartment co-owned by my parents and my uncle. We pay the maintenance. My parents and my uncle would like to give us each their halves of the co-op to help us with a down payment on a first home. But, would this adversely affect the taxes on our profit when the co-op is sold?
How would it affect advantages we would receive as first time home buyers?
Answer: You're asking two questions. The first, I assume, has to do with the up to $250,000 per person (up to $500,000 per married couple) exclusion you get when you sell a personal residence. To get the exclusion, you must have lived in the home for the past two out of five years, you must own it, and it must be your main home. Since the apartment is actually owned by your parents and your uncle, I don't see how you could qualify. Unfortunately, from what you say, it sounds as if your parents and uncle, if they were to continue ownership and sell, could not claim the exclusion, either, because they were not actually occupying the property.
Q&A: Are uneven floors a sign that something's very wrong?
My suggestion is that you consult with an accountant who has all of the details BEFORE you sell. You might find it to your advantage to have your relatives give you their shares and then you could live in it for a qualifying time before selling to avoid a big tax bite.
The other question, I assume, has to do with first-time buyer mortgage advantages. To qualify as a "first-time" buyer, you usually must not have owned a home for the previous three years. I believe that from what you say, having lived in a co-op, but not actually owned one, you would qualify. Check with a mortgage broker just to be sure.
Mr. Irwin has more than 25 years' experience as a Los Angeles-area real-estate broker. He is the author of more than two dozen books about real estate and is recognized as one of the most knowledgeable writers in the real-estate field. Mr. Irwin's most recent book is "Irwin's Power Tips for Selling a Home for More" (McGraw-Hill).
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Bonnie, New City, N.Y.
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