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Paying Cash for a Home Carries Risks
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DEAR JOHN: Nobody knows the answer to your question for sure. Presuming you meet the 24-out-of-last-60-months primary-residence ownership and occupancy tests of IRC 121 by the time you sell, I would argue the 24 months began when you became a tenant in common and moved in.
Conversion to condominium ownership was to improve marketability and was a continuation of that ownership. Sorry, no rulings or other information are available on your situation.
DEAR BOB: My boyfriend and I got the mortgage for my house together. I put a $30,000 cash down payment on the house. The title is in my name only, but the mortgage is in both our names. Is he entitled to half of the house? -- Lupe B.
DEAR LUPE: I presume your boyfriend co-signed the mortgage because he has good income and great credit. Most mortgage lenders insist co-borrowers be on both the mortgage loan obligation and on the title. Your situation is quite unusual.
Based on your description, if your boyfriend's name is not on the title, he didn't make any down payment and he doesn't pay part of the mortgage, property taxes or home repairs, he appears to have no ownership interest in the house. For details, consult a local real estate lawyer.
DEAR BOB: Can a single home seller claim more than the $250,000 primary-residence-sale tax exemption by using the entire capital gain to buy another home for a higher price than the residence sold? -- Kevin C.
DEAR KEVIN: No. As a sole home seller, you are limited to the $250,000 principal-residence-sale tax exemption of Internal Revenue Code 121. That's presuming you owned and occupied your primary home at least 24 of the last 60 months before its sale.
Purchasing another home for greater cost won't increase your exemption.
DEAR BOB: My rental property is worth about $590,000 and has a $376,601 mortgage. If I sell, to avoid tax do I have to invest all my profit in another property or can I use a small amount to invest in a second property?
-- Tracy McG.
DEAR TRACY: To qualify for an Internal Revenue Code 1031 tax-deferred exchange, you must trade equal or up in both property value and equity. You can trade your one investment property for two or more rental or business properties if the totals equal or exceed what you receive for your current rental property.
The amount of the mortgages on the acquired properties must equal or exceed the old mortgage balance. If you keep any cash or net mortgage relief from the trade, that is taxable "boot" to you. Please work with a qualified third-party intermediary accommodator to be certain your transaction qualifies as a tax-deferred exchange.
