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Stephen G.
Stephen G., Sr Income Tax Expert
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My brother bought a condo under mothers name about 10 years

Resolved Question:

My brother bought a condo under mother's name about 10 years ago when the subprime mortgage was allowed. Title (deed) is under mother's name and the loan is under mother's name as well. But my brother paid the down payment and monthly payments for 10 years.
Now he is suffering financially and couldn't pay the mortgage several months. The equity had built up about $120k (market price is $200k and loan amount is $80k) but he cannot sell the condo because the profit will go under mother and mother will lose the benefit from medicare and SSI. Is there any way to avoid losing the benefits for mother?
Submitted: 2 years ago.
Category: Tax
Expert:  Stephen G. replied 2 years ago.

Stephen E. Grizey :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.

Stephen E. Grizey :

What was the property used for?

Stephen E. Grizey :

Did your brother live at the property? Did your mother?

Customer:

The property was used for mother to live. Brother paid for the mortgage and the condo fee.

Customer:

So my mother lived there for 10 years and brother didn't live there at all.

Expert:  Stephen G. replied 2 years ago.

Well for income tax purposes, there isn't a problem as your mother will be able to exclude up to 250K profit on the sale of her principal personal residence. So there is o taxable gain & no reporting for income tax purposes.

As far as Medicare is concerned, there is no problem there as Medicare isn't need based; qualification is based upon age or disability.

The same with social security, if she is collecting regular social security or Social Security Disability income (SSDI).

If she is on SSI (Supplemental Security Income) or Medicaid, then her benefits could be affected, as she will have the cash from the sale of the condo & those programs consider assets & income from all sources.

If she isn't on Medicaid at the moment and were to make a transfer of the equity in the home back to your brother, that could create a problem down the road as there is a 5 year "look-back" disqualification period where she would be ineligible for Medicaid for some period of time because of the transfer.

If the down payment and all the payments for the condo were made by your brother, perhaps a Medicaid planning attorney could draft affidavits to be signed by your mother & brother that the title to the condo was held by your mother as a matter of convenience for your brother and there was no gift from your brother intended beyond the use of the condo by your mother.

However, if that were sufficient to preserve your mother's SSI benefits as well as not disqualify her from any Medicaid benefits, then that advantage would have to be weighed against the potential that the sales transaction could be taxed to your brother. To the extent that your brother doesn't have any significant other income, even if that were to occur, the tax could be minimal or even zero.

The only way to determine that would be to do a pro-forma income tax return for your brother and see what his income tax might be if the gain on the sale of the condo were included in his tax return.

Please remember to click on the green "ACCEPT". Feedback if you have time and bonuses where you think they are warranted, are always most appreciated. Thanks again for using our service. If you'd like to contact me again, just ask for "Steve G" at the beginning of your question.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4182
Experience: Extensive Experience with Tax, Financial & Estate Issues
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Stephen G.
Stephen G.
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