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# In 2008 my wife and I purchased a home with my son. The purchase

### Customer Question

In 2008 my wife and I purchased a home with my son. The purchase price was \$226,500. My son and my daughter have lived in the home and have made various monthly contributions to the mortgage payment. My wife and I have may the majority of the mortgage payments and have claimed all of the interest and tax credits. We would now like to sell the home to my daughter. The sale price is 285,000, she will take out a loan for \$228,000, we owe @214,000. The additional \$14,000 will be used to pay our realtor fees, sellers insurance, her closing costs and to provide her with a couple thousand dollar cushion in her checking account. The difference between \$285,000 and \$228,000 will also be gifted to her. Will any of us need to pay tax on this transaction?
Submitted: 1 year ago.
Category: Tax
Expert:  emc011075 replied 1 year ago.
Hi. My name is ***** ***** I will be happy to help you.
The scenario has to be treated as two separate transaction. Sell of the property (as you would sell it to an unrelated person) and the gift.
Because there are 3 owner, the basis and the proceeds has to be divided by 3.
Basis: 226,500/3 = 75,500 (each)
Sales proceeds: 285,500/3 = 95,000
Capital gains for each of you: 75,500-95,000 = 19,500 (each)
Assuming your son used it as his primary residence since 2008, he will be able to exclude the gain under principle residence exclusion. You and your spouse, because you didn't used the place as your primary residence will have to report capital gains of \$39,000 (9,500x2)
You cannot deduct the closing costs because those will be paid by your daughter. The fact, that you made mortgage payments doesn't change your capital gains because the mortgage interest is deductible in the year it is paid. (Schedule A). You will also have to report the difference between 285K and 228K as gift on form 709. Assuming you haven't used up your 5.43M lifetime gift tax exclusion, there will be no gift tax.