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Got it. Mirror, mirror, on the wall. That kind of reflection.
Well...as to the "big tax bill"...
I would expect that he would be eligible for the capital gains exclusion on the sale of a primary residence (which is not a one-time exemption, as I'm sure you know)...and the basis wouldn't be zero. A recipient's basis on gifted property is the basis of the donor. (That's why it's generally better for a parent to leave a property to children in their will, rather than gift it beforehand.) Since the OP will receive a stepped-up basis as an inherited property, if the OP gifts the property to him he would receive the OP's basis--the valuation of the property at the time of the father's death. Tax-wise, the ex will be sittin' pretty.
Has anyone seen the lease? Or is this all based on the word of the ex? Has he been paying rent to the estate? But no matter what the answer is get a lawyer.
^^^
This reminds me of an extreme example of the difference between the basis on gifted property and that on inherited property. Several years ago I brokered a sale where the Sellers had been gifted the farm by their mother, without legal counsel, I'm sure, instead of putting the farm in her will or even retaining a life estate on the gift. The farm had been acquired over 70 years before, so the basis in the property that the (adult) children received was extremely low. They ended up having to pay capital gains tax on nearly a million dollars in profit. Had the property been inherited, with a stepped-up basis, they would have owed nothing in capital gains tax.
Has anyone seen the lease? Or is this all based on the word of the ex? Has he been paying rent to the estate? But no matter what the answer is get a lawyer.
Yes, OP wrote that she now has a copy and that it looks like her father's signature and believes it is something he would have signed.
Has anyone seen the lease? Or is this all based on the word of the ex? Has he been paying rent to the estate? But no matter what the answer is get a lawyer.
OP said she has seen it and recognizes her father's signature on it, along with a receipt showing rent paid in full. As to whether it's still valid after fathers passing that's definitely where the lawyer comes in.
I mostly agree with presenting this to the buyer/investor, and if they choose to continue then it's their problem to deal with. A lawyer's counsel will be good for your own protection though. Make sure there aren't any gotchas that could get you in hot water.
The buyer/investor is probably used to doing "cash for keys" where the person is squatting or maybe has a 1yr lease. So offering say $5k to get them out tends to work. Might not be that easy in this case. You'd have to pay me a lot to walk away from several decades of prepaid rent. This is where the validity of the lease could be the make or break factor.
Dude that was just one of several options - and would be the last one if she is desperate
It goes from getting a lawyer involved to get him out before the sale, let the new owner deal with it, if can't sell - sign it over and walk away or finally just let it go.
OP said she has seen it and recognizes her father's signature on it, along with a receipt showing rent paid in full. As to whether it's still valid after fathers passing that's definitely where the lawyer comes in.
I mostly agree with presenting this to the buyer/investor, and if they choose to continue then it's their problem to deal with. A lawyer's counsel will be good for your own protection though. Make sure there aren't any gotchas that could get you in hot water.
The buyer/investor is probably used to doing "cash for keys" where the person is squatting or maybe has a 1yr lease. So offering say $5k to get them out tends to work. Might not be that easy in this case. You'd have to pay me a lot to walk away from several decades of prepaid rent. This is where the validity of the lease could be the make or break factor.
It was 50 dollars a month for 25 years - so 15K. How long has he been there?
It was 50 dollars a month for 25 years - so 15K. How long has he been there?
It doesn't have to do with what he paid, it's what he'll have to pay somewhere else if/when he leaves.
Let's say I can live somewhere for basically nothing for the next 10yrs. Someone offers me $20k cash to leave. It's way more than I paid the whole time I lived there. Sounds great right? Now I have to go rent an apartment for $1000/mo for the next 10yrs, total of $120k. I end up spending $100k more than if I had stayed. Not such a great deal after all. That said, in these situations many people wouldn't look at the long term math. A big chunk of cash right now today is tempting. So it could still work.
Obviously this all hinges on the lease being valid and enforceable. Will be interesting to see what happens.
Last edited by simplechamp; 01-08-2021 at 06:22 PM..
Has anyone seen the lease? Or is this all based on the word of the ex? Has he been paying rent to the estate? But no matter what the answer is get a lawyer.
The OP says she has seen both the lease, and also the prepaid rent for the entire period receipt and they are her fathers signature.
Yes there is a lease probably prepared by an attorney, and the rent is already paid till end of lease so there is no rent due to the estate. The ex has a lease and it is prepaid, so he can live there till end of lease with no payment due to the estate or anyone else.
The father was in need of a caregiver for some of his needs, and he made a deal with the ex, to provide the care which he apparently did, and needing some money leased the property to the ex who he liked on a prepaid basis. He got what he needed, and the ex son in law, got a great deal on a home to live in. Both got their needs met.
In investment real estate, a prepaid lease is not uncommon, and is usually rented below market to get the tenant to prepay. A prepaid lease, lasts till the end of the lease, no matter where it is located.
The buyer for the properties has told the OP that they know how to handle such a situation, and that is to buy out the ex's lease rights, etc. You are talking professionals that know how to handle such situations.
Running down to a lawyer and spending a lot of money, is not going to solve the problem the way the OP would like to see it solved. It is a valid prepaid lease, and the new buyers are prepared to buy the property with the lease on it apparently.
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