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Merlo
Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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Should I purchase my boyfriends condo or get my name up on

Resolved Question:

Should I purchase my boyfriend's condo or get my name up on the title and pay the loan off? I will sell some investments to buy the condo or pay off the loan, but which has the best tax advantages for me and my future husband? I haven't purchased a home myself in over 20 years, so maybe the new $8000 tax credit would come into play.
Submitted: 5 years ago.
Category: Tax
Expert:  Merlo replied 5 years ago.
Hello pakainz,

If you purchase the home from your boyfriend, then you would qualify for the $8,000 tax credit. Do not simply add your name to the deed and pay off the loan.

Also make sure that you complete the purchase before you and your boyfriend decide to get married. Once you are married, you would no longer qualify to purchase this condo in your name only and still qualify for the $8,000 credit.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you pakainz.

Customer: replied 5 years ago.
But does he have a tax liability if I only buy his condo for the amount of the loan balance?
Expert:  Merlo replied 5 years ago.
Hello again pakain

How long has he owned the condo and how long has he lived there?

What is the condo currently worth and how much is the loan balance?


Customer: replied 5 years ago.
He's lived there for about 7 years. The balance on his loan is $62,000.00 and he was just trying to sell it for $132,000.00. I would just buy it for the amount of the loan balance.
Expert:  Merlo replied 5 years ago.
Hello again pakainz,

There are two issues here.

1. He would not owe any tax on the sale of his condo to you. The IRS currently allows single taxpayers to exclude $250,000 from the gain on the sale of their primary residence before any tax is due. Since he has owned this condo and lived there for at least 2 years, this qualifies as his primary residence. Therefore his exclusion amount of $250,000 would more than zero out any gain he had, and so he would owe not taxes on the sale.

2. Since he would be selling you the property at way less than the fair market value, then the IRS would view this as though he may a partial sale and a partial gift. What that means is that he would have to file a gift tax return. There would not be any tax due, but he would need to report the gift. The gift he would be giving you is the difference between the fair market value and the amount he is actually allowing you to buy it for. If the fair market value is $132,000 and he sells it to you for the loan balance of $62,000, then he has given you a gift of $70,000.

The IRS allows each taxpayer to give gifts in their lifetime of up to $1 million before any tax is due. However, any gift which exceeds $13,000 in any one year must still be reported by filing Form 706. No tax is due until the $1 million lifetime exemption has been used up, but he would have to file that form.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you pakainz.

Customer: replied 5 years ago.
Is there anything in the "closing costs" of a home purchase that is tax deductible?
Expert:  Merlo replied 5 years ago.
Hello again pakainz,

The only thing that you can deduct as far as closing costs is the property tax that you end up paying as part of those costs. In other words, if your boyfriend has already paid the property taxes on his condo for the entire year of 2009, then if you buy the condo on July 1st, you would end up paying him back for 6 months worth of the property taxes, and that is a tax deduction that you may take on your own tax return. Nothing else is deductible.

If this was helpful please press the Accept button.

Thank you pakainz.

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Merlo and 2 other Tax Specialists are ready to help you
Customer: replied 5 years ago.
Thank .you. This has helped me immensely. I'll be back with any further questions.
Expert:  Merlo replied 5 years ago.
Thank you pakainz.

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Merlo
Merlo
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25+ years tax consulting. Specializing in returns for US citizens living abroad