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Posted by Stuart Bronstein on October 25, 2007, 5:00 pm
Please log in for more thread options Seth wrote:
>> wolfman wrote:
>>> Since it was my idea and I knew where the land was my
>>> brother agreed to put up all of the money and we would split
>>> the profit 50/50.
>> Ok so far. But please explain a little more why you were
>> getting half interest if you were not investing any money.
> He didn't get a half interest in the property. He got a
> half interest in the profit.
If it's a partnership, getting half interest in the profit
means half interest in the partnership. Otherwise he'd
simply be a hired hand.
>>> To protect his investment we agreed to put the land in his
>>> name only.
>> I'm also confused about this. Why in the world would you do
>> that? How does that protect the investment?
> It protects the person who put up the money, since he owns
> the property.
It's not much protection if it turns into a lawsuit. They
should have had a partnership agreement explaining all that.
Otherwise that kind of "protection" can be meaningless.
>> You will have to justify that it was a legally reasonable thing to
>> do if you were actually a half owner.
> He wasn't a half owner of the property. Initially, he had a
> 0% interest. As the price increased, his equity did as
> well.
Again, legally he had no interest in the property per se.
But if it were a partnership and he was entitled to half the
proceeds from the beginning, he was immediately half owner
of the partnership.
>> but gave nothing in exchange except for your services. If
>> that's true you should have recognized taxable income at the
>> time in the value of the property you received. If you
>> didn't, that could be a problem.
> What is the taxable value of a half interest in the excess
> sale price over $100,000 for property whose current market
> value is $100,000?
It's what a willing buyer would pay, of course. How much
would you pay for that? It's certainly worth more than
nothing if you can just sit and wait for the property to
increase in value, with no downside.
Stu
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