How to tax shelter/selling a home less than a year?

[kade4111]

I have purchased a pre construction property with a friend in Jan. 05, located in south Florida. 5 % was put down and the purchase price was 289,000. The closing will be in November/December '05 and since I already have a home in my name (can't qualify for a second), he will be the only name on this home ect. We plan on selling the home as soon as we close on it. My friend lives in Michigan in his first home so I believed this will be purchased as a second home, but it is an investment only. I live her in south Florida but the home is 45 minutes and do not want to live that far south. I know it would be taxed as a short term capital gain at his tax rate.

Problem #1
How can we shelter these capital gains as much as possible so we are not taxed at 33%?

Problem #2
When we do finally sell the home at about 100,000 dollar profit and he gives me my 40,000 dollars, will I be taxed again?

Problem #3
I will have been living in my home for 2 years as of May '06, I plan on selling my home at about 100,000 dollar profit. Is it possible to take the home we bought together 1031 exchange it for a home closer to me and then I would roll my homes profits into this third home after paying him his share of the second home (this way never being taxed on the home we bought together). And if this is possible, I know this home would have to be in my name, can he just sign it over as a gift or something or just do an added step at closing so that I can be considered an owner as well in order to do the 1031 exchange, live in it for two years and get the tax shelter?

Thanks for the help, Kevin

[Snipes5]

With this much money at stake, spend some of it on some quality tax assistance. An Enrolled Agent and a 1031 Facilitator can help with all of it.

Note that if he gifts you $40,000, he will be required to file a gift return.

Since the house is only in one name, you can't do a 1031 for something YOU purchase. HE will have to do a 1031 himself, not involving you.

As for question 2, it really IS possible to own property in two names even though the mortgage is only in one name. It would have been better to do it that way.

In any event, hire a pro, this is too complicated to get into all the details online.

Snipes

[kade4111]

The investment home has not yet been place in his name since we have not had a closing yet. So your saying it would be better to have my name on the deed somewhere as well. If both are names were on the deed and I lived in it for two years as my primary resident down here, could I avoid the capital gains? And if my name was on the deed, could I do a 1031 exchange even though his name was on it too. Thank again

[Snipes5]

If you live in it and own it for two years, when you sell it, your portion won't be subject to capital gains, but his portion might be, depending on HIS circumstances.

If you own part of it, yes, you can do a 1031 exchange for YOUR portion, he will have to do that for his portion if he wishes.

If you own and live in it, and he doesn't live there, you can sell your portion outright, and he can do a 1031 for his portion.

If you do decide to do this, or anything involving a 1031, make SURE you talk to a facilitator before you do anything. There are strict regulations and deadlines that must be followed.

Once you have sold the property, you can't do a 1031. Also, you cannot put personal property into a 1031 exchange, so if you live there, you can't 1031 your portion.

Snipes