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Old 02-07-2018, 07:26 PM
 
11,265 posts, read 11,276,606 times
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Quote:
Originally Posted by lvmensch View Post
Consider mortgaging it. You can do a reverse mortgage for half its value or to avoid the high front end costs of a reverse mortgage consider a conventional at 80%. Then make the payments on the mortgage out of the proceeds. You need to talk to your tax adviser about the ramification particularly when your mother passes on. If CA continues as it has you may even pick up enough value to offset the mortgage payments
This is not a bad idea. Any interest payments should more than be offset by the savings on capital gains. Thank you for that.
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Old 02-07-2018, 07:27 PM
 
11,265 posts, read 11,276,606 times
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Quote:
Originally Posted by ansible90 View Post

What Medicare tax are you talking about?
In 2013 Congress passed a tax on capital gains of 3.8% IN ADDITION to the 20%. California combined with Federal has the 2nd highest tax in the world.

Quote:
If your sale is such that you must also pay the federal long term capital gains tax rate of 20 percent, you'll end up paying the second-highest capital gains tax rate in the world—a combined 33.3 percent.
https://www.thebalance.com/californi...nation-3193244
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Old 02-07-2018, 08:10 PM
 
Location: Lone Mountain Las Vegas NV
12,901 posts, read 4,881,056 times
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Quote:
Originally Posted by FloridaHappy View Post
1) She has to live in the property in order to get a reverse mortgage and it becomes due and payable when she vacates the property, such as moving to a nursing home.

2) There are no payments on a reverse mortgage. It just accumulates interest until the owner vacates and then the property is sold, foreclosed, or an heir pays off the mortgage. Irrelevant in this case as she doesn't live in the home, but just an FYI for future reference.

Conventional won't work unless she can prove she has enough income to make the payments on the mortgage. Most banks will only loan 75% of the appraised value of the house since it's a rental property and not her primary residence. I guess you could take that money and just not make any payments, putting the house into foreclosure, but somehow the word "fraud" enters my mind.

You need an attorney...
If you read what i wrote correctly that is what I said. I had not realized she had not lived in the home so she can't play the reverse game. But that is a loser for anyone 98. High front end cost when life expectancy is small.

And at 75% it is still a good deal and should be paid out of the proceeds particularly if the yearly appreciation is near or higher than the payments.

And again the advice of a financial adviser skilled in taxes is needed.

But a sale is probably the last thing you want to do.

And the view that an Attorney is the right person simply indicates the writer does not know much about attorneys.
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Old 02-07-2018, 08:28 PM
 
Location: Silicon Valley
18,124 posts, read 23,000,049 times
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Retired property manager here - is the rental also under rent control? If so, you could also end up having to pay the tenants relocation money.

It seems a shame for you to lose that property, since it's been under Prop 13 protection for so long, and that can be passed down through the family, as I understand it.

I'm not educated in these types of tax matters, but some type of mortgage does seem like the best option - especially if you'd have to pay to get the tenants out, too. And to hold onto that income-producing gold mine with property taxes based on 1970's value assessments.
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Old 02-07-2018, 08:33 PM
 
Location: planet earth
4,835 posts, read 1,849,974 times
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Quote:
Originally Posted by thrillobyte View Post
It's a SFD in a living trust that has been rented since my mother bought it in '72 so the step-up doesn't apply here. I do know I will need an expert. I'm just looking for some ideas what he will tell me and if I used the online tax calculator wrong and the tax is actually higher and not offset-able by some little-known tax techniques.
If it has been rented for all of those years, does it qualify for a 1031 exchange?
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Old 02-07-2018, 08:39 PM
 
Location: Silicon Valley
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Quote:
Originally Posted by nobodysbusiness View Post
If it has been rented for all of those years, does it qualify for a 1031 exchange?
But, don't those require you to put all of the proceeds into another property? It sounds like the OP needs cash or more income.
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Old 02-07-2018, 08:51 PM
 
14,264 posts, read 24,009,233 times
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I would certainly hire a tax attorney or a CPA before any sale. Personally, by selling prior to death, you might be missing a step-up basis that would eliminate any capital gain.
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Old 02-07-2018, 09:15 PM
 
Location: Lone Mountain Las Vegas NV
12,901 posts, read 4,881,056 times
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Quote:
Originally Posted by NoMoreSnowForMe View Post
Retired property manager here - is the rental also under rent control? If so, you could also end up having to pay the tenants relocation money.

It seems a shame for you to lose that property, since it's been under Prop 13 protection for so long, and that can be passed down through the family, as I understand it.

I'm not educated in these types of tax matters, but some type of mortgage does seem like the best option - especially if you'd have to pay to get the tenants out, too. And to hold onto that income-producing gold mine with property taxes based on 1970's value assessments.
That raises an interesting question. While I am sure she will end up mortgaging the property you might well look into selling the home to an LLC which is then placed into the trust. The maneuver is to get the home LLC owned so that you can sell the LLC and not the home. Could have a large impact on value. You need good CA professional input on this. I have a good CA CPA of the colorful sort if you need advice on whether that can be pulled off. DM me if you want it.
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Old 02-07-2018, 09:19 PM
 
11,265 posts, read 11,276,606 times
Reputation: 3459
Quote:
Originally Posted by NoMoreSnowForMe View Post
Retired property manager here - is the rental also under rent control? If so, you could also end up having to pay the tenants relocation money.

It seems a shame for you to lose that property, since it's been under Prop 13 protection for so long, and that can be passed down through the family, as I understand it.

I'm not educated in these types of tax matters, but some type of mortgage does seem like the best option - especially if you'd have to pay to get the tenants out, too. And to hold onto that income-producing gold mine with property taxes based on 1970's value assessments.
No, fortunately I don't have to pay the tenants' costs though I will give them money for being such good tenants. Yes, the Prop 13 has been a lifesaver. If only my mother didn't need the money. But that's the reality of extremely old age.
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Old 02-07-2018, 09:23 PM
 
11,265 posts, read 11,276,606 times
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Quote:
Originally Posted by nobodysbusiness View Post
If it has been rented for all of those years, does it qualify for a 1031 exchange?
Yes, but the thing is my mother needs large amounts of cash each month to pay her medical expenses for assisted living and a private aide.
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