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Has the property been stepped up in value (was there ever any other owner who might have died and perhaps you did a Date of Death Appraisal)?
Is it in a trust?
Is it a commercial property (1031 Exchange eligible?)
If residential, is it eligible for exemption?
Etc., etc.
You do need expert advise.
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.
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
If the property was your mother's main home, is she eligible for the exclusion.
Was the house originally bought along with your dad (or someone else)? The basis may have changed when she inherited her half of the property.
What Medicare tax are you talking about? (besides what MathJak explained about having to pay higher Medicare premiums) when you have a high income year.
Be sure to get information based on the new tax laws.
Good luck. Let us know what you find out, taxwise.
I'm the trustee for my mother's living trust. She's 98 and doing well but not completely mentally efficient. I need to sell a property she bought in a good area in Los Angeles County back in the early 70's for about 15K. It has since appreciated to about 750K at last conversation with the agent who will sell it. The problem: the Federal capital gain is 20%, the state capital gain is 13.3% and the Medicare tax is 3.8% for a total of 37% directly to the combined governments. Is there any way to reduce these taxes without having to do Starker exchanges and similar exotic techniques? My mother needs the money for her very expensive care and I don't feel like I'm doing her estate justice by subjecting it to roughly 220K in taxes.
Is there any way to make it a primary residence for a couple years so at sale time it gets the 500k capital gains exemption?
Don't pay a tax attny for such an easy question. Mortgage the property in one way or another. When she dies, the capital gain is gone. That's it, gratis.
Don't pay a tax attny for such an easy question. Mortgage the property in one way or another. When she dies, the capital gain is gone. That's it, gratis.
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
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.
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
Don't sell it. There will be zero estate taxes since it's way below the Federal and California limits. At age 98, how many years are left?
Is there any way to make it a primary residence for a couple years so at sale time it gets the 500k capital gains exemption?
that is not how it works anymore . the exclusion is prorated by the total amount of time owned vs the time it was a personal residence. the old convert to a personal residence and reap the rewards was done away with about a decade ago
that is not how it works anymore . the exclusion is prorated by the total amount of time owned vs the time it was a personal residence. the old convert to a personal residence and reap the rewards was done away with about a decade ago
Did that just change with Trumps bill? The 500k exclusion part on a residence lived in for 2 years.....
I’m thinking you could transfer to an heir, have the heirs live in it for a couple years to get the 500k exclusion for living in a primary residence. I’m honestly not sure of the specifics, but a neighbor recently went into a nursing home, and the kids now own the house and intend to sell in a couple years. They are in the same situation....CA homethats appreciated 900k.
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