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LawTalk
LawTalk, Attorney
Category: Real Estate Law
Satisfied Customers: 35309
Experience:  I have 30 years legal experience. Additionally, in CA I held a Real Estate Broker's license.
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Want to exchange my home(7y owner) with parents (12year

Customer Question

Want to exchange my home(7y owner) with parents (12year owners)
Gifting to each other looks like an option without reassessing properties (each will assume others taxes), but what about income tax and stuff (one has to live in house for 2 years before can sell it without worring about income tax, will this be considered a new ownership or can the home (once deeded to me) can be sold as If I sold the home I lived in for 7 years)?
Submitted: 6 months ago.
Category: Real Estate Law
Customer: replied 6 months ago.
The idea is that I am ready to sell my home after 7 years residency and want to buy another, but my parents (who have their home of 12 years) would take my home instead and hand me theirs, so I would sell theirs instead to buy the new one. Will I be able to sell it the same as I would mine, whats the proper way to do this then? File the deeds as gifts to each other (and then file with assessor that those were parent to child and child to parent transfers)?
Expert:  LawTalk replied 6 months ago.
Good afternoon,I'm Doug, and I'm sorry to hear of the confusion. My goal is to provide you with excellent service today. As there is a gift and no capital gain, there would be no capital gain tax to pay. However, if you later sell the home that you have been gifted, you will have to pay a capital gain tax on the gain unless you live there at least 2 out of 5 years. This is new ownership for capital gains tax purposes. Will I be able to sell it the same as I would mine, whats the proper way to do this then? No, you will not. And because you are selling the gifted home, you will have to pay capital gains tax on all the gain that you recover. The gain will be based on the basis your parents have in the property when they gift it to you----which could be quite significant. You may reply back to me using the Reply link and I will be happy to continue to assist you until I am able to address your concerns, to your satisfaction.I hope that I have been able to fully answer your question. As I am not an employee of JustAnswer, please be so kind as to rate my service to you. That is the only way I am compensated for assisting you. Thank you in advance.I wish you and yours the best in 2016,Doug
Customer: replied 6 months ago.
How would the capital gain be looked at (based on market value?)? Both properties are completely owned by each of us (lets say mine is 100K higher in market value - that I will be gifting to them, and taking smaller home that I will sell) How is the gain/loss calculated in that case for the smaller home if I were to sell it after the gifting? absed on what they paid 12 years ago or based on market value difference? in which case I woul dbe loosing 100K technically ? Or is this not the way to go about this, I am not sure if this makes sence, we are not trying to subvert the system in anyway, just don't wan to pay extra fees or taxes if we don't pick the right way to do this?
Expert:  LawTalk replied 6 months ago.
As you may not be aware, the Rules of JustAnswer specify that each customer ask one question in each question thread. These are new questions that you are asking. For new questions, the customer is asked to open a new question thread. I do sincerely ***** ***** any inconvenience this might cause you. Doug
Customer: replied 6 months ago.
Oh, ok, then to just to clarify the answer you already gave me to my question, you said:
"As there is a gift and no capital gain, there would be no capital gain tax to pay." - so If I gift home to my parents they do not have to file any gains on it (intend is they will live in it and not sell it at for least the 2 years) -- the reason I am wondering, is I thought gift can't be more than 20K per year before having to pay taxes, ir does this not apply to home gift (unless they are sold)?
Customer: replied 6 months ago.
Meaning home is worth more than 20K $ but is gifted not sold
Expert:  LawTalk replied 6 months ago.
Hi, Sorry for any confusion. There is NO capital gain based on the transfer of the properties between the two of you. The only gain arises if you sell the property you get without living in it for 2 years. Capital gains has nothing to do with gift taxes. Neither of you will pay gift taxes on the exchange. You may reply back to me using the Reply link and I will be happy to continue to assist you until I am able to address your concerns, to your satisfaction.Please remember to rate my service to you so that I can be compensated for helping you. Thank you in advance.I wish you and yours the best in 2016,Doug
Customer: replied 6 months ago.
Ok almost there but that last part is a little confusing, sorry, when you say "Neither of you will pay gift taxes on the exchange." sounds like we HAVE to do the exchange for there to not be gift taxes? Or is it that there is no taxes on the gifting the house?
Expert:  LawTalk replied 6 months ago.
when you say "Neither of you will pay gift taxes on the exchange. When I said that, the ONLY thing I meant by it was that you may gift each other the homes and neither of you will have to pay any federal gift tax based on the gifts you have given. sounds like we HAVE to do the exchange for there to not be gift taxes I think that it goes without saying that it is impossible to have a gift tax imposed if there has not been a gift made. You may reply back to me using the Reply link and I will be happy to continue to assist you until I am able to address your concerns, to your satisfaction.Please remember to rate my service to you so that I can be compensated for helping you. Thank you in advance.I wish you and yours the best in 2016,Doug
Expert:  LawTalk replied 6 months ago.
This seems like a very crucial matter for you, and your questions and issues suggest that an in-depth conversation might best suit your needs.I have been a licensed, litigation attorney for more than 30 years, and I have handled several thousand cases. What you are asking for is all but impossible to respond to adequately in this written format, and in my experience is only practical to approach in a phone conversation.If you are interested, for a nominal charge I can offer you a phone conference as opposed to continuing in this question and answer thread. If you are not interested just let me know and I will be happy to opt out. Perhaps someone else would be willing to tackle your request.
Expert:  LawTalk replied 6 months ago.
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