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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 6102
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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I have a long winded question do you have time to wait while

Customer Question

I have a long winded question do you have time to wait while I type it involves tax implications for a real estate sale
Submitted: 6 months ago.
Category: Tax
Expert:  Stephen G. replied 6 months ago.
Post the question; I'm not going anywhere but I will work on something else & come back when you're done.Try to Edit it down to the facts; "just the facts man, just the facts"Steve G.
Customer: replied 6 months ago.
I have a home that I purchased in Orlando with cash in November, 2010 for 78,500. A month later I added my girlfriend to the with a quit claim deed ($100). We lived in the house until April 2014 at which time my girlfriend bought a house in her name in Deltona, FL. We moved to Deltona and rented the Orlando house to my girlfriend's brother. We have sold the house in Orlando and are closing April 20. I am trying to figure out how the proceeds should be disbursed and subsequent 1099 to avoid paying capital gains. I am 54 years old and have already used my 1 real estate capital gain exemption. My girlfriend is 62 and has never sold a home. After the sale we will be paying off the mortgage on the Deltona house and adding my name with a quit claim deed. Can the proceeds from the sale of the Orlando house go 100% to me, need to be 50/50 or 100% to my girlfriend to avoid capital gains. Thank you
Customer: replied 6 months ago.
we are selling the Orlando house for 150,000. Girlfriend bought the Deltona home for 95,000 with 91,000 currently owed on the mortgage
Expert:  Stephen G. replied 6 months ago.
Sale of Orlando home will be 4/20/2016.What are you talking about that you used your 1 real estate capital gain exemption? You are talking about the old rules now? When did you use it? There is no one-time exclusion anymore & you aren't bound by that anymore if you are talking about what I think you are talking about.When did you use it? When you sold a home before you bought the Orlando home in 2010?OK, the new rule is that if you own the home & live it it as your primary residence for 2 out of the previous 5 years ending on the date of sale, you each would qualify for a $250,000. exclusion on the sale of the Orlando home.So, if you sell on 4/20/16, 5 years starts on 4/20/11. Since you both lived in the home as your primary residence until 4/2014, or approximately 3 years out of the 5 years ending 4/20/2016, you each qualify to use the exclusion of up to $250,000. each.You should be asked to sign an affidavit at the closing on 4/20/16 which confirms that you qualify for the Personal Residence exclusion and that eliminates the Closing Agent from filing a 1099-S on the sale.Now, technically if you reported the rental income on the Orlando property while your girlfriend's brother occupied the property, the depreciation that you claimed or should have claimed on the rental is not eligible for the exclusion and you should be paying capital gains tax on that depreciation. Or, if you treat the rental income as reimbursement of expenses by a family member occupying the property while you were figuring out what to do with it, then there no rental property and no depreciation "recapture". So one question is how did you treat the occupancy by your girlfriend's brother taxwise?It doesn't matter what you do with the proceeds from the sale of the Orlando or who gets it or what. If you both own it & aren't married, you should split the proceeds 50/50.Buy the Deltona home doesn't have any impact on the capital gain. So, you're more than covered by the exclusions and there should be no 1099-S for either of you & no reporting of the sale except if you have to "recapture" the depreciation as described above.
Expert:  Stephen G. replied 6 months ago.
Just Checking in....................Do you have any follow-up questions?If not, please remember to rate my response as that is the only way we receive credit for our work.Steve G.

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