Capital Gain - 2 homes

[dst13]

VAWhat is the name of your state?

Hi, here is my situation. My mother and I own property in VA, but only her name is on the mortgage loan, but my mother's, my husband's and my names are on the deed. The property was bought in August 2002. We plan on selling it but both my mother and I each own separate homes (one each) in another state The reason we are selling is because my mother has health issues with her diabetes plus she broke her arm recently (and was recently diagnosed with osteoporosis) requiring her to live closer to her family. (Note that the VA home is approximately 75 miles away from her family members-- including me.) She will obtain a letter from her doctor indicating that it is not safe for her to live so far away in VA because of her health situation-her doctor has expressed this concern to her on several occasions.

Note: My main home is the in another state. However, we plan on taking my husband's name and my name off the deed prior to selling the VA home.

My mother lived in and used the VA house as her main home for approximately 1 year and 2 months. (She changed her car insurance and MVA information to VA.) The VA house has been rented for the past 6 months (Jan 2005-June 2005) and will probably be sitting vacant soon.

An added twist is that in Jan 2004 she sold another principal/main residence and took advantage of the capital gain exclusion on her 2004 return. The home she owns and lives in now (different state) was bought in Dec 2003, but served as a secondary home until Jan 2005.

The capital gain on the VA home would be approximately $70,000 to $80,000.

Questions:

Do my husband and I need to have our names removed from the deed in order to keep from paying capital gain taxes even though the mortgage is only in my mom's name?

If so, once our names are removed, does my mother qualify for a capital gains exclusion given all the circumstances and will it be a partial exclusion?

Are there any rules or time constraints associated with removing names from a deed as it relates to capital gains guidelines?

Also, if she waits until Jan 2006 (2 year anniversary of the sell of previous main home) to sell the VA property (after my and my husband's names are removed from the deed) will she then qualify for the exclusion?

Thanks for your assistance.

[tdavidl]

hi, you have some meaty issues there & i think the circumstances are such that you may (your mom rather) may be able use the full cap gain exclusion on the sale fo that home.

that's as far as i can go though. you should consult with a CPA (or tax professional) in your area & pay them a few hundred dollars to make sure you do things properly to either minimize your gain or exclude the gain totally. the few hundred dollars is money well spent if it can save you the tax on $80k of cap gains.

[dst13]

Originally Posted by tdavidl

hi, you have some meaty issues there & i think the circumstances are such that you may (your mom rather) may be able use the full cap gain exclusion on the sale fo that home.

that's as far as i can go though. you should consult with a CPA (or tax professional) in your area & pay them a few hundred dollars to make sure you do things properly to either minimize your gain or exclude the gain totally. the few hundred dollars is money well spent if it can save you the tax on $80k of cap gains.

Thanks tdavid for responding! I really appreciate your advice; however, I hate to ask--but I was hoping you can provide a little more specific answers to the questions. For example, do you think my husband and I be liable for capital gains tax if I take my name and my husband's name off the deed first before selling? Will a note from her doctor suffice for not meeting two year use rule? And what type of proof would my mom need to show she lived in VA as her primary home? We are consultanting our tax accountant and awaiting a response but wanted to get another's perpective.

[tdavidl]

unfortunately you have very specific circumstances which aren't necessarily discussed in the code, so i'd be offering up an opinion, not necessarily fact. in addition, there are many other questions one would have to ask & a forum like this would be doing you a dis-service.

sorry, maybe someone else here can provide you with the exact answers you are seeking.

[dst13]

Hi, hoping to get some additional info. Please see previous discussion. Just wondering if anyone else can shed any light on my situation. In particular, will I need to remove my name and my husband's name from the deed so I am not liable for capital gains taxation. Also, the title company that added our names says they can cut a 1099 to show all the proceeds goes to my mom not us. They said they would send a $0 1096 for me and my husband. Not sure why they would have to send a $0 1096. But most likely this title company will not be the settling co since the buyer usually picks the title co.

Please help if you can.

Thanks so much!