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Originally Posted by hidavi
My friend's dad and his dad's ex girlfriend are joint tenants on a property. They're legally being forced to sever the joint tenancy. She refuses to sell with him to anyone but her sister. He refuses to sell to anyone but his daughter.
The court has decided that his preference takes priority for whatever reason, which appears to present some unfavorable issues for my friend and her dad:
1. her dad will have to pay a closing cost to buy his ex-girlfriend's half (he would be paying in cash) and tax to sell it to his daughter
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You appear to be contradicting the issue, and not making sense.
If the court has determined that "Dad's" preference of *buyer* (his daughter), then both parties (Joint Tenants) can sell to the daughter. Issue closed.
Btw, in all you said, you haven't demonstrated that the Joint Tenancy is "severed". I suspect that you mispoke, and are likely speaking to their *relationship* status, as opposed to their *ownership" status.
Severing Joint Tenancy ownership status, MEANS that the interest of one or more parties has been given to one or more of the other Joint Parties. In the case you describe, either the dad or the gf would be giving up their status as Joint Tenant, and the remaining w/h FULL rights (though not necessarily *Interest*).
Anyway, I presme that you mispoke and that the Joint Tenancy is NOT severed. Simply, that their personal relationship is over.
*****
As stated above, the court has determined that dad's choice of buyer has prevailed.
Now, I have to point out certain contradictions in your post:
[/quote]My friend's dad and
his dad's ex girlfriend....
...unfavorable issues for my friend and
her dad: [/quote]
I'm CONFUSED! Is your "friend" a guy, girl, or androginous??
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1. her dad will have to pay a closing cost to buy his ex-girlfriend's half (he would be paying in cash) and tax to sell it to his daughter
2. she will have to pay a closing cost to buy the whole house from her dad (she would be taking out a mortgage)
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I surmise, that your friiend is a girl, and that she is the "dad's" *daughter*, the court determined allowed 'buyer', correct?
[quote]
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1. her dad will have to pay a closing cost to buy his ex-girlfriend's half (he would be paying in cash) and tax to sell it to his daughter
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Simply put, your friend and her "dad", NEED to consult either a real estate attorny and a tax attorney or a tax accountant.
What they need to determine is, what will be the most effective manner to convey the interest of the Joint Tenants with a minimum tax liability, as well as to limit (what you term as "closing cost").
For example, there will likely be a "transfer tax", and in the case of a coop (every coop is different), a so called "flip tax", which is a fee penalty coop's impose on sales to prevent *flipping*.
Another possible issue is the value which is being convey to the daughter, and how will the IRS view the conveyance, as a *gift*, *income*, etc.
There is also, the issue of Capital Gains! Presuming that the present value of the coop is greater than the purchase value, the difference represents a financial gain, which is taxable.
Sooo, no one in this forum can give you an adequate response, because there are a GREAT many details, which ONLY a real estate and tax professional(s) can address.
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Is there any way to reduce the financial complexity that doesn't involve her NOT buying the house?
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The transaction will be complex, there is no way to escape that. Yet, there are SEVERAL ways to convey property, and several intended to minimize costs/liabilities.
It must be determined, by a close examination of the circumstance, which is the most productive method for the circumstance. Again, a professional is required.
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I mean, is there any way that he can just buy his ex-gf's half without paying closing costs or any way he can sell her the house without paying tax (maybe because they're father/daughter, I dunno)?
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Overall, not likely, at minimum, there w/b the issue of the IRS, and whether the daughter is receiving Income or a Gift, either way there will be a tax liability.
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To protect her ownership from legal contest in the event he were to pass, he can't sell it to her below market value, so no tricks can be done that way.
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Selling *below* market has NO bearing whatsoever!!
Just as an example, the "dad", could use the *cash* to "buy out" the GF, then convey the property to his daughter for $1. Again, the IRS issue is a factor.
One additional factor to consider is whether the daughter, if she becomes the owner of record, then SHE will likely have to be vetted and approved by the Coop Board. If she, independantly, does not meet their ownership standars, then she will not be approved, and consequently cannot own the coop in her name.
So, AGAIN, consult a professoional. I suggest, BOTH a real estate attorney of GOOD experience and competence, as well as an equally credentialed tax accountant or tax attorney.
You can find an attorney by calling (or visiting the site) of the New York County Bar Association's referral service. They will inform you of a couple of competant attorneys. You will need to articulate the circumstance well, so they can advise you properly and choose an appropriate attorney.
Sorry, I cannot advise as to how to find a competent tax accountant. I'm sure there is some tax accountant organization with referral service. If you find a good real estate attorney, it is likely he will know of a competent accountant or tax attorney. Might be best, as they will need to work closely in order to structure the deal to the best benefit.
*****
The lesson here is DO NOT "Joint Tenant" with a Girlfriend to whom you have no permanent legal relationship, such as MARRIAGE!!
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