[WSBARP] who pays the tax on gain?

[John J. Sullivan]

Doug:

I haven’t been able to definitively research this. Somewhat surprisingly a quick answer did not pop up. 

Here’s my two cents worth as a tax attorney. 

Did the parents help with the down payment or mortgage or other expenses? They are presumed to own 50/50 unless otherwise established. 

On sale, the daughter may be eligible for the gain exclusion on the sale of a primary residence, assuming she qualifies under the ownership and residence tests. The parents’ capital gain is on investment property, assuming no treatment as a rental. They probably report on their separate returns and a 1099 goes to all owners. 

I would be careful about a pre-sale gift. That would mean the daughter would recognize 100% of the gain. Does it exceed her $250K exemption? Also, I am not sure she would qualify for it on the gifted portion because she has neither owned nor resides in that portion long enough. 

I would suggest they consult a tax attorney/CPA. And consider either having the daughter make a gift of the tax the sale adds to the parents return, or, if they don’t want the gain on sale, they can gift their share of the gain net of the taxes. 

Just an early Saturday morning first draft of an analysis without thorough research. 

John J. Sullivan

Sent from my iPhone

> On Apr 10, 2021, at 10:52 AM, Kaitlyn Jackson <kaitlyn at dimensionlaw.com> wrote:
> 
> Cant the parents just quit claim deed the house to the daughter as a gift? 
> 
> Sent from my iPhone
> 
>>> On Apr 9, 2021, at 11:14 AM, Douglas Scott <doug at rainieradvocates.com> wrote:
>>> 
>> 
>> Parents buy a house for their daughter.  All 3 are on title, but parents want nothing to do with the house.  Upon the sale of the house the parents don't want any tax liability. How do the parents avoid this and which one of them (or all) get the 1099S?  Is it whoever gets the payment? 
>> 
>> DOUGLAS W. SCOTT
>> Rainier Legal Advocates|LLC
>> 
>> 465 Rainier Blvd. N., Suite C 
>> Issaquah, Washington 98027 
>> 425.392.8550 (tel)
>> 425.392.2829 (fax)
>> 
>> 
>> 
>> www.rainieradvocates.com
>> 
>> 
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