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Richard, Tax Attorney
Category: Tax
Satisfied Customers: 55607
Experience:  29 years of experience as a tax, real estate, and business attorney.
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9o year old father moving in with children. Question should

Resolved Question:

9o year old father moving in with children. Question: should children sell house (paid for and covered under Ventura County, CA prop 13) or rent it out?
Concerns: does capital gains change after rental term? House was bought for $23,000, current value $400,000.
Is one time IRS exemption changing in near future?
Submitted: 6 years ago.
Category: Tax
Expert:  Richard replied 6 years ago.

Good afternoon. First, if you rent it now and then it transfers at your father's death, the basis will be stepped up to fair market value so if you sell it then, there will be no gain. If you are going to sell it before death, you want to sell it while it is a primary residence rather than a rental so he is eligible for his $250,000 capital gains exclusion. But, that still is going to leave a tax exposure. The exemption is not scheduled to change presently.



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Customer: replied 6 years ago.

From childrens perspective, sell now, get $250,000 exclusion, pay current capitol gains on difference, gift sale revenue to children minimizing their tax exposure.

-Are capitol gain taxes scheduled to go up?

-Are gift exclusions set to change?

Rent now, transfer at death, change basis then so no capitol gains, but children exposed to high tax rate at sale of property? House is currently in trust so would it trigger inheritance tax?

Based on tax exposure to children, more benificial to rent house now and sell later, or sell now and take exclusions?



Expert:  Richard replied 6 years ago.

Capital gains are scheduled to go up.


If you gift it now, it will transfer gift tax free due to father's $1,000,000 lifetime exemption, but you don't get a step-up in basis.


Gift exclusions are not scheduled to change.


If the property is transferred at death, the children won't face any tax at sale because the basis gets stepped up to fair market value at death ($400,000) so there will be no gain.


No inheritance tax would result at these levels.


BotXXXXX XXXXXne...better to rent until death, then sell after death for no gain.



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