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Old 12-29-2017, 03:01 PM
 
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stabilized apartments are always sold for cents on the dollar ,even the most high end .

depending on the rent roll you can pay very little .

we have two apartments for sale right now , over looking central park in one of nyc's most prestigious buildings for .50 cents on the dollar . investor groups are offering 35 cents and want to steal it .
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Old 12-29-2017, 03:18 PM
 
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Quote:
Originally Posted by sportyandmisty View Post
two thoughts:

Let's say the parent's basis in the house is $100,000.

The irs would call the sale to child for $1 a non-arms-length transaction among family members. The parent's tax return, at a $1 sale price, would not reflect the hypothetical $400,000 of gain in a true arms-length fair market value transaction. Yes, i know about the cap gain exclusion on a primary residence, but you get the idea.

Second, what you describe sounds like a good scenario for a qualified personal residence trust or qprt. See https://www.investopedia.com/terms/q...ence-trust.asp

it is all about minimizing the value of gifts so as not to end up exceeding the lifetime gift tax exclusion (about $5 million)

what too many are ignoring, is that each person with exemptions for spouses, can only be gifted $14,000 in any one year, and all value above $14,000 to any one person is taxed at gift tax rate (increasing to $15,000 after january 1, 2018.

If you want to do a trust as shown below, don't take that information as fact. Go talk to a good cpa and they will work with you to save taxes if possible. It is not as simple as this poster seems to think. An old friend of mine was at one time considered the best tax cpa/attorney in the country. He is so good, he was hired by the grand cayman islands when he wrote their tax haven laws. I have heard chuck speak several times, and have discussed things like this over lunch or dinner multiple times. We met in 1977 at a special conference in the grand cayman islands. Our wives sat together for the 10 day conference and chuck and i sat besides or wives. The equivalent of a prime minister for the grand cayman islands (they are british) sat in front of me, and i got to know him through chuck. This head of the government, gave me his opinion of chuck. We got together at at least one conference per year for several years, and the 4 of us would eat meals together. He taught me a lot.

https://www.investopedia.com/terms/g/gifttax.asp



the basic idea (oversimplified) is the parents give the house to the qualified personal residence trust, but the house is encumbered: The parents retain the right to live in the house for, say, the next 20 years at a nominal rental rate (say, $100/year) when the fair market rental rate is much higher (say, $30,000 per year).

That difference in actual vs market rental rate for the next 20 years "encumbers" the property, thereby reducing the property's fair market value today. So, instead of the house being worth $500,000 today, the encumbrance reduces its value to, say, $300,000.

This gets the house out of the parent's estate only soaking up $300,000 of the gift tax exclusion rather than the fair market value of the house absent the qprt which would be $500,000.
1
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Old 12-29-2017, 03:30 PM
 
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nm
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Old 12-29-2017, 04:39 PM
gg
 
Location: Pittsburgh
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You could deed the home as "right of survivorship", so you child would be on the deed and when you die, it would just go directly to him/her. You don't need to sell it for a buck, but you can. Also, your child wouldn't owe taxes on the home if it is their primary residence, although I am not sure the amount these days that one can sell their home without a tax burden. It is probably around $500K, but I can't remember.
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Old 12-29-2017, 04:52 PM
 
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it is 250k after living in it 2 years for a single.

right of survivor-ship is for 2 joint owners . there are tax implications as one owner holds the original cost basis of the property but inherits the other half at a step up . not really a good way to transfer to heirs .. there can be tax issues from that as well as the heir may have their own house and no interest making it a principal .

Last edited by mathjak107; 12-29-2017 at 05:00 PM..
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Old 12-29-2017, 05:11 PM
 
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Quote:
Originally Posted by mathjak107 View Post
according to what i see on nolo in order to take the loss on the sale is if the house was a rental first . gains can be taken on properties bought for flipping . you would need to show you sold one property that was an investment property , sold it and replaced it with this if you want to deduct a loss without it being a rental .


The only way you can obtain a deduction if you sell your home at a loss , is to convert it to a rental property before you sell it. However, your deductible loss will be limited. This is because when you convert property you held for personal use to rental use your tax basis (value for tax purposes) is the lesser of the following values on the date of the conversion:
the property’s fair market value, or
the property's tax basis.
He never lived in the house. He bought it from his mother to give her some cash to live on until she died. She paid some sort of rent, so it was an investment property. He already said he was limited to a $3,000 per year loss because it was passive activity.

Quote:
Originally Posted by gg View Post
You could deed the home as "right of survivorship", so you child would be on the deed and when you die, it would just go directly to him/her. You don't need to sell it for a buck, but you can. Also, your child wouldn't owe taxes on the home if it is their primary residence, although I am not sure the amount these days that one can sell their home without a tax burden. It is probably around $500K, but I can't remember.
That would be bad, and could create issues later,including the child suing to have the property sold to get his/her share.

Quote:
Originally Posted by mathjak107 View Post
it is 250k after living in it 2 years for a single.

right of survivor-ship is for 2 joint owners . there are tax implications as one owner holds the original cost basis of the property but inherits the other half at a step up . not really a good way to transfer to heirs .. there can be tax issues from that as well as the heir may have their own house and no interest making it a principal .
My parents did a sort of life estate with my brother as the remainderman, which avoids probate. The deed was written in such a way as to let my parents retain all the rights they had in the property.
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Old 12-29-2017, 05:17 PM
 
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you really have to see a good attorney because like i said earlier .putting a personal home in the name of a revocable trust unprotects the asset if medicaid is needed .

the house becomes a counted asset in a trust and would have to be sold and the money spent down to qualify for medicaid .

very dangerous playing with trusts many times and your parents home .
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Old 12-29-2017, 05:41 PM
 
Location: The Ozone Layer, apparently...
1,906 posts, read 677,656 times
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Quote:
Originally Posted by dothetwist View Post
They can, but why??? If a parent sells their home to a kid, that kid's basis for the house is $1. Meaning when that kid sells the house for 500K, that kid owes tax on the ENTIRE amount, less the $1.

Best thing is to set up a trust for the parents...when they die and it goes to the heirs (named in trust) the basis of the house is its value on date of death of last parent....no taxable gain.

In SOME states you can do TOD (transfer on death) with homes, but you should see a lawyer about that...in any case, see a lawyer who handles elder law (common nowadays).


Quote:
Originally Posted by galaxyhi View Post
Totally agree.

The cost basis is at whatever the value is at the transfer. Just as if the child had bought a house from Joe Mainstreet for $1 and sold it $200k

If I pay my father $1 for his house, and sold it after his death for $200k, I would have a major problem. A $199k problem.

But if he dies and it worth $150k then I sell it, I have only the $50k to deal with.

As noted, like my father did, set up a Revocable trust , or you could do a "Life Estate ", whereby you have the house and live in it as owned until death, then it transfers. A REVOCABLE TRUST can be changed if you changed your mind. An Irrevocable trust is carved in stone. You want a REVOCABLE TRUST set up.

You can have a will, but a trust will Trump the will, though you can have a will for assets acquired outside the trust. A trust helps also to mitigate probate costs, which m9st people don't think if when executing a will only.

Contact an elder attorney and or a CPA and or Revocable trust management entity or all three to mitigate the damage.

I'd not want to buy my father's house for $1 though it would be tempting. I'll wait for it to pass to me through his REVOCABLE LIVING TRUST that he set up over a decade ago.

Best of luck deciding how to proceed.

I agree with consulting a Real Estate and Trusts attorney first, but this is how I became a home owner. If I should sell the property, and dont realize a profit of more than $250K (currently in my state) between its established value at the time of my MIL's passing, and the value at the time I sell, I pay no tax at all.

In my state, LTC is covered by Community Medicaid, and the trust cannot be revoked over a need to access it. All other assets need to be out of a elders name for 3 months, and they qualify while still maintaining that trust. The only person that could revoke it was my MIL, should she have changed her mind about my owning her home. All property taxes were maintained as her responsibility and with all exemptions that she qualified for.

BUT! All this is in my state, and may not be the same in yours, so, it would be imperative to talk with a lawyer, preferably one with knowledge of Real Estate AND trusts. It had cost us $1500 for her to set it up for her son, and when he passed (6 years later) it cost $3500 to do it with me, as well as register the new deed with the new trust. Also, speak with people that help families with Long Term Care issues about what options, benefits and laws are in your area regarding that. Its a very real concern for families, because not everyone is lucky enough to be living life graciously and independently, and then suddenly pass away in their sleep.

It was easy for us to set up the trust (called a 'living estate' where I am) because my husband was an only child, and I was his rightful heir since we had no children. If you have siblings, things may not be so easy for you - another aspect to find out about.

Last edited by ComeCloser; 12-29-2017 at 05:49 PM..
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Old 12-29-2017, 06:20 PM
 
6,085 posts, read 3,112,986 times
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Quote:
Originally Posted by Crashj007 View Post
[sarc]I've given this a lot of thought this weekend because I apparently expect to win Powerball and Mega Millions this weekend; total annuity value about $700 million. [/sarc]
They have video of the actual transaction at the POS and they know who bought it. They know if you've been good or bad, so be good for goodness sake. Any such scheme is a quick way to be declared a fraud and a way to lose the prize.
Don't think so....you can give a lottery ticket as a present

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Old 12-29-2017, 07:16 PM
 
6,353 posts, read 5,170,148 times
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Quote:
Originally Posted by mathjak107 View Post
it is really pushing things trying to claim it as an investment property . if they don't pick up on it you are lucky . you really need some way of proving it wasn't personal .
OK, all right. It was in a different century, so I'm not worried about it. And the tax on $6000 isn't very much.
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