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Married with two homes

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  • Married with two homes

    I just got married and both my husband and I own our own homes. He has owned his condo for about 2.5 years and I refinanced my parents home and has owned it for about the same amount of time. We would like to sell mine to get rid of an extra home, but my elderly parents still occupy it. I do have siblings that may refinance it in their name (to own it), but what is the best way to not be stuck when we file our taxes? We do not wish to pay for capital gains on this.

    Someone said you can avoid the capital gains tax by make sure you own your home atleast 24 months. Another said you have only 1 year from the marriage to be exempt. What is best?
    Last edited by kgtyo; 07-15-2005, 12:49 PM.

  • #2
    To exclude gains on the sale of a main home, you must have owned and lived in the home for at least 2 years of the 5 year period ending on the date of sale. The 2 years does not have to be 24 consecutive months.

    To determine capital gains, you would have to consider the equity which you have in the home--is the home paid for, or is it mortgaged? Have you made improvements which would increase the value of the home. How much did you pay for the additional costs of purchasing the home-- which would adjust the basis of the cost? Would you sell the home at a profit--e.g. if you sell the home and do not have any gain over what you invested, there is no capital gain. Is the FMV of the home significantly more than what you paid at the time of purchase?

    Have you sold any other homes within the past two years?

    There are also exceptions to the two year rule, concerning disability, military service, changes of financial circumstances, unforeseen circumstances, change of employment locality, etc.

    See IRS Pub 523
    "What would a reasonable person do?"

    A.S. Paralegal
    Criminal Justice Student--B.S.

    "Give this guy 15 cents and tell him to go to hell."


    • #3
      Well if you have not lived in the home for 2 of t he last 5 years, you cannot avoid capital gains. My suggestion maybe is to sell the home to your siblings, either via land contract where you just report the interest as income as it comes in, or sell it to them for a fair price where you will not have much gain or loss. If you have no gain or loss, then there is nothing to tax or very little to tax capital gain tax wise. But also, since you are selling to relatives, there is a chance you are going to be charged with the market value of the home when you got it from your parents as the basis, then there is a calculation you do adjusting for costs of sale, improvements, etc..., so if you sell it at the right place to siblings, you should have no loss or gain. Consult a tax professional with specifics of your scenario to see what that price figure is.


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