Selling property tax question

[Anonymous]

The $1 consideration thing is really just a first year law student fact pattern to illustrate a common law transaction. You have to give up something in return for getting something for a contract to be valid. But the fact that you are not actually vacating the property is a problem--Did you record the deed under your son name yet? If not just tear it up. Both parties can rescind a contract by mutual agreement. Breathe. Next time don't take advice from your beautician who knew a guy who knew a guy who was a lawyer

[Anonymous]

Why were you taking depreciation if you were living in the house? I thought depreciation was only for business assets (i.e. you are renting it out).

[Anonymous]

Anonymous wrote:

Anonymous wrote:There are kinds of tax implications in this transaction.

No gift tax will be owed, but you will have to file a gift tax return disclosing the value of the gift.

You will have calculate the value of the depreciation and pay a 25% recapture tax on it yourself.

Selling the home for an artificially low price, if it's even allowed, may also expose you to a capital gains tax on the home. If you are single, the exclusion is only $250,000, and if you're not vacating the home, it could look very much like an artificial transaction.

More importantly, you are kind of screwing your son from a tax standpoint down the road. Not only would his tax basis be artificially low, he'd be better off inheriting property than being given it.

The lawyer told me that it's fine to sell at $1 which is why I did the transaction. It's me and my husband, so I guess the exclusion can be $500,000? Yes, we're not vacating the home and the lawyer said that it would be fine. He screwed us over then. That's why I am asking for opinions because maybe you can shed light on it somehow. So the recapture tax is 25% flat on the fair market value of the house, which is $500 *25% = $125k that I will owe. Can this transaction be nullified and cancelled since I am not vacating the home? Like a reversal since you mentioned that this look like an artificial transaction.

What kind of lawyer? You should definitely consult a tax lawyer or a CPA.

The good news is you described the depreciation wrong. It's 25% of the accumulated depreciation claimed, not a flat 25% of the home value. The bad news is you've got to tally all that depreciation you claimed over the last 17 years. Hope you have good records.

[Anonymous]

Anonymous wrote:Hi everyone,

I have a tax question on real estate. I have taken depreciation on my house for the past years (like ~17 or so) and have decided to sell it to my son last year. If it was sold at a $1 to him. What are the tax implications? Do I have to pay like ~$200k to the government because I took the depreciation benefit over the years? The house is only worth $500k in its value. I don't even have that money to give to the government since I only sold it at $1.

I'm still wondering what in the world you were trying to accomplish by selling your home to your son for $1.