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Hello and thank you for using Just Answer,Randall tax is not online (experts have no set time to be on Just Answer) so Just Answer put your question out to all tax experts so you would not have to wait.Friend B has purchased a portion of Friend A's property. Friend A has sold a potion of their property. This arrangement would not qualify as a like kind exchange because it is personal use (their homes) in nature and Sec 1031 prohibits personal use such as homes.I do not see any gift in any of the transactions. These are all sales and the value received for the sal ewould be used in reporting.
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Since these first two exchanges are individual homes they do not have to report a sale as they did not make a gain of $250,000. Only the last sale has to be reported as it was an investment property at that point and not a personal residence.
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Hi again, Since I didn't have all the information the first time, I have a new twist and question to this puzzle. Friend A jointly owned a home with his uncle after being added to the property years ago, and now due to death becomes the full owner. This home is not the primary home for Friend A.
How does Friend A figure his cost basis? Does he use the stepped-up value of the home in figuring whether there is a gain or loss when he quit-claims the home to Friend B.
Friend B is adding Friend A to his home to equal 1/2 ownership in exchange for Friend A's home. All very confusing. Friend A did not receive a 1099S from the quit-claim transfer to Friend B.
Friend B will sell the home he received in the exchange and will have to pay
tax on any gain he makes.
So are you saying he can use the full stepped-up basis and not the 1/2 step-up
basis for joint ownership?
Thanks for the info. I thought so on the stepped up basis but wasn't sure since
he was part owner.
I can't understand from your first example what, exactly, is going on.But if you reduce the analysis to AN INTEREST in something ... (whether it's half or full or 1/3) ... then you look at how THAT INTEREST was received to know what the basis is IN that INTEREST.If I buy a piece of land with by brother (and let's say it's jointly) and my brother dies (and in joint tenancy I am an heir to his half), then I now have a two different bases in the property; In 1/2 of it, I have my purchase price and in the other half I have a basis of whatever the value was on his date of death.So let's say we bought for 100,000 (that gives us each as basis of 50,000) and when he dies its worth 200000, ... I now have a basis of 50,000 PLUS the 100,000 basis that was left to me; $150,000 in the property.NOW, if he had gifted it to my (by quit-claim or any other re-titling, AND I gave him nothing for it, making that a GIFT, then my basis would be 100,000 (my original basis plus his original 50,000).So, if I sold the property for $300,000 the result would be the following:... a $150,000 gain, if he had died and left his 1/2/ to me.... a $200,000 gain, if he gifted it to me.Think about it this way ... each person does their own taxes, so what matters is not the basis in the asset, but rather that PERSON'S basis in the asset .. based on how much of it they own.Hope this helpsLane