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emc011075
emc011075, Tax adviser
Category: Tax
Satisfied Customers: 2571
Experience:  IRS licensed Enrolled Agent and tax instructor
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I have a partner and we bought a property 15 years ago and

Customer Question

I have a partner and we bought a property 15 years ago and we both have lived in the property. The house is titled in her name but we both have a percentage interest in the property. How do we both do the capital gain can we both take the 250,000 deduction each. Thanks Steve we are in Ca.
Submitted: 9 months ago.
Category: Tax
Expert:  emc011075 replied 9 months ago.
Hi. My name is ***** ***** I will be happy to help you. What do you mean with percentage interest? Is there a mortgage? And if yes, whose name is ***** ***** mortgage?
Expert:  emc011075 replied 9 months ago.
To qualify for the exclusion, BOTH of you must meet the 2 year residency test, but only one needs to meet the ownership test. But if you are not filing a joint return, only the legal owner will have to claim capital gains and can claim the exclusion.
Customer: replied 9 months ago.
yes to mortgage in her name. we have written agreements on percentage of ownership on the property we buy. I own 20% but not on title. We have both lived on the property for 18 years. How do we get a tax break?
Expert:  emc011075 replied 9 months ago.
If the property is titled to her and the mortgage is in her name, she is the legal owner. If you are not filing a joint return, she is the only one who will have to claim capital gains and 250K exclusion.
Customer: replied 9 months ago.
how do we get the best solution so we can both claim the deduction?
Expert:  emc011075 replied 9 months ago.
Here's what IRS says: How your sale qualifies. Your sale qualifies for exclusion of $250,000 gain ($500,000 if married filing jointly) if the following is true:- You owned the home and used it as your main home during at least 2 of the last 5 years before the date of sale.- You did not acquire the home through a like-kind exchange (also known as a 1031 exchange), during the past 5 years.- You did not claim any exclusion for the sale of a home that occurred during a 2-year period ending on the date of the sale of the home, the gain from which you now want to exclude. If you are not filing a joint return, she needs to put you on the title if you want to claim 250K exclusion each.
Expert:  emc011075 replied 9 months ago.
Questions? Basically, if you are not filing a joint return you BOTH must meet the residency and ownership test. The only way for you to meet the ownership test is to put you on the title of the property so you have legal ownership.
Expert:  emc011075 replied 9 months ago.
I see you offline now. So if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. You find the rating bar on the top of the page – 5 stars. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.
Customer: replied 9 months ago.
doesn't this qualify as a gift if we put me on title and as such have to pay the gift tax
Customer: replied 9 months ago.
this is not a new topic but is part of the same question. you said I could be put on title for the additional 250,000 each capital gain
Customer: replied 9 months ago.
this answer seems to be leading into a gift tax to be put on is this true?
Expert:  emc011075 replied 9 months ago.
Technically, if she doesn't sell you part of the house (money will be involved), she will gift it to you. If the amount is more than 14K she will be required to file a gift tax return. But unless she already gifted a small fortune, 5.43M to be precise, she will not have to pay any gift tax. There's 14K annual exclusion but there's also 5.43M (2015 and 2016) lifetime gift tax exception. It means an individual can gift up to almost five and half millions without having to worry about gift tax. Putting you on the title will NOT increase your capital gains by 250K. It will help YOU to meet the requirements for the 250K exclusion. So instead of her claiming all capital gains and 250K, you both can split the capital gains each of you claim 250K.