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Richard
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 45699
Experience:  29 years of experience as a tax, real estate, and business attorney.
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Hi There, I am just about to offer my landlord $990 for a

Resolved Question:

Hi There,
I am just about to offer my landlord $990 for a house that she want to put on the market for $1.4M. She is an old lady whose biggest concern is the tax she will pay on the sale. I am constructing a deal where I can save her apx 400K in Agent fees, bringing the old house up to code and then also not having the house sit on the market and loose rent for perhaps months in this uncertain market. The last proposal is that we could possibly pay her $300k in 2010 and then the rest in 2011 to save her on capital gains tax. Do you know if there is a legal structure for this A) and B) How much could I save her in capital gains tax through this structure (or any other that you might know of) to make this deal work? So many thanks. K. Lassalle
Submitted: 3 years ago.
Category: Tax
Expert:  Richard replied 3 years ago.

Good morning. What you are really talking about is an installment sale where she would report part of the gain in 2010 and then the rest when she collected the rest of the money. The only problem would be is that under the Obama administration, it is projected that capital gain tax rates are going to increase from their present 15%. If this is her home, she is going to be entitled to a big capital gains exclusion from the sale of her personal residence.

 

 

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The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

Customer: replied 3 years ago.
This is not her personal residence. She is my landlord - so she is renting it to me.
Expert:  Richard replied 3 years ago.
Thank you. Then you can simply structure it as an installment sale transaction, although the risk of a capital gains increase makes this a bit less enticing.
Customer: replied 3 years ago.
I do understand that if it is her second residence that there are more capital gains tax. The question I have is - do you have any idea how much I can save her in capital gains tax by structuring it in this way via an "installmemt" loan - or indeed is there another way that you know of that can save her in capital gains tax so that I can make the argument that she is better of selling to me than putting it on the market?
Expert:  Richard replied 3 years ago.

The real only way is to stop renting it from her so she can claim it as a residence to qualify for the capital gains exclusion. One other way, though probably too complicated for her to grasp, and not for the feint of heart because the IRS could collapse the two transactions into one, would be to buy it for a lesser amount and then make her a separate gift which you could exclude under the lifetime gift credit and would not be income or gain to her.

 

I would appreciate it if you would please click the GREEN ACCEPT button so that I receive credit for my work; otherwise, though you have made a deposit, I do not receive credit.

 

 

Richard, Tax Attorney
Category: Tax
Satisfied Customers: 45699
Experience: 29 years of experience as a tax, real estate, and business attorney.
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