Avoiding Capital Gains tax on second home

[spa220]

What is the name of your state (only U.S. law)? New Jersey

My father in law had a house in Weehawken, NJ that the entire family grew up in. It's completely paid off.

When he got older (about 69), he bought a second home near us in Saddle Brook, NJ and that became his primary residence. He kept the Weehawken house thinking that one of his four kids would eventually want it and he was very attached to it sentimentally.

It is now 6 years later, the Weehawken house is empty and running into disrepair and he realizes now that no one wants the house. It is up for sale.

Obviously he has to pay capital gains tax on it since it is now his second home and not his primary residence.

Can capital gains tax be avoided if he sells to his daughter for let's say $1? Then she can list the house for sale (she doesn't own a home currently) and she wouldn't have to pay capital gains tax as this is her only residence? The monies can then be given back to her father?

Is this feasible?

 

[Mass_Shyster]

Sis would have to pay gains tax unless it is her primary residence for some specific amount of time. I think it's two years, but may be more.

 

[FlyingRon]

A sale of $1 would be considered a gift which may have issues of it's own. As stevef points out, unless someone lives for two years there as a primary residence, no capital gains exclusion is available.

 

[tranquility]

While the house may be gifted, it will take the basis of the donor.

The exemption of $250K from capital gain has to do with those who own and live in as their personal residence 2 of the last 5 years.

 

[spa220]

Thanks

Thanks to all. we'll just have to take the CGT hit.