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Posted by Stuart Bronstein on July 1, 2007, 8:33 pm
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> Here is a strange one which raises some not very important
> tax questions:
>
> What is the government's cost basis for its half of the
> house?
Since the government isn't a tax paying entity, I don't
think it makes a whole lot of difference. That said, it's
probably market value on the date of forfeiture.
> Would the government be subject to capital gains tax should
> the house be sold at a profit?
Only to the extent they would be subject to tax on the value
of anything forfeited. If they were subject to tax, they'd
probably have to claim ordinary income in the value of what
they forfeited on the date of forfeiture. If it were later
sold, they would have a taxable, possibly capital gain in
the amount of any increase in value after that date.
> If the profit was large enough, would the woman get the
> benefit of her full $250,000 exemption or just half of it?
She'd get the whole exemption, but on only her half of the
house.
One issue is whether, upon forfeiture, the husband has any
taxable capital gain. I suspect he might.
> How about local property taxes? Is the government exempt?
> And if so, would the woman have to pay 100%?
I think the federal government is exempt, though I'm not
sure. Assuming they are, the wife is likely only liable for
half the property tax.
> Not a tax question, but, zoning permitting, what's to
> prevent the government from using its half as a half-way
> house or other such use that would not be very pleasant for
> the other half owner?
Depends on what they do. If it could be considered a public
or private nuisance, they could be sued to have it abated.
But whenever there are two owners of property, one has the
right to have the place sold and the proceeds split. So I
don't think it's a real issue.
> I am not really seeking answers to these questions. They are
> merely thoughts that passed through my slightly addled
> brain.
There's an answer for every question. They may not be
right, but they are certainly there.
Stu
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