|
Posted by BE on July 13, 2007, 5:18 am
Please log in for more thread options
A friend of mine has a terminally ill wife and he is sure
that he will not stay in his home alone. They have been
married for over 30 years and can easily take a $700k profit
on their home if they were to sell, even in this tougher
market.
My question: since couples get a $500,000 tax free capital
gain on the sale of a home and a single person only gets
$250,000, is my friend going to lose the chance to take the
$500,000 tax free gain just because his wife will likely
have died before the sale of the house?
Be
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>
|
|
Posted by joetaxpayer on July 15, 2007, 3:09 pm
Please log in for more thread options
BE wrote:
> A friend of mine has a terminally ill wife and he is sure
> that he will not stay in his home alone. They have been
> married for over 30 years and can easily take a $700k profit
> on their home if they were to sell, even in this tougher
> market.
>
> My question: since couples get a $500,000 tax free capital
> gain on the sale of a home and a single person only gets
> $250,000, is my friend going to lose the chance to take the
> $500,000 tax free gain just because his wife will likely
> have died before the sale of the house?
First, I'm sorry for the sad news. Behind the numbers is an
awful personal situation.
Your friend should be able to take advantage of a stepped up
basis as follows:
House cost: $200,000 (for example)
Sales price: $900,000 (to get to $700,000 gain)
Wife's half - gets stepped up to $450K current value upon
her passing.
Friend has basis of $450 + 1/2 ($200K) = $550,000
He then has his $250K exclusion, total $800,000 of sale not
taxed.
His net taxable gain is $100K.
(If he sells it the same year she passes, he may get her
$250K exclusion as well. That's a point I am unclear on, as
it seems to be 'double-dipping')
JOE
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>
|
|
Posted by ed on July 15, 2007, 3:09 pm
Please log in for more thread options
> A friend of mine has a terminally ill wife and he is sure
> that he will not stay in his home alone. They have been
> married for over 30 years and can easily take a $700k profit
> on their home if they were to sell, even in this tougher
> market.
>
> My question: since couples get a $500,000 tax free capital
> gain on the sale of a home and a single person only gets
> $250,000, is my friend going to lose the chance to take the
> $500,000 tax free gain just because his wife will likely
> have died before the sale of the house?
In the year his wife dies, he will file a joint return and
will be able to take the full $500K exemption. If he sells
the house after the end of the year she dies he only gets
his $250K exemption.
However, he gets a "stepped up basis" on the house on the
date of her death which would eliminate the full gain to
that date in a Community Property State, and 1/2 the gain if
the house is held in joint tenancy in a non-Community
Property State. If held soley in her name...full step up.
If held soley in his name, no step up.
ed
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>
|
|
Posted by Bill Brown on July 18, 2007, 5:12 am
Please log in for more thread options
>> A friend of mine has a terminally ill wife and he is sure
>> that he will not stay in his home alone. They have been
>> married for over 30 years and can easily take a $700k profit
>> on their home if they were to sell, even in this tougher
>> market.
My question in this situation is could the husband give his
terminally sick wife his half of the house. Then upon her
death the entire house would get stepped up value and no
taxes would be due upon immediate sale. This, of course,
requires fully trusting the dying wife not to change her
will. Would this also work with other assets, such as
stocks, bonds, vacation house, etc (excepting insurance
which would have a 3 year look back)
-Bill (not the active bill brown in this group!)
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>
|
|
Posted by Arthur Kamlet on July 19, 2007, 10:32 pm
Please log in for more thread options
>>> A friend of mine has a terminally ill wife and he is sure
>>> that he will not stay in his home alone. They have been
>>> married for over 30 years and can easily take a $700k profit
>>> on their home if they were to sell, even in this tougher
>>> market.
> My question in this situation is could the husband give his
> terminally sick wife his half of the house. Then upon her
> death the entire house would get stepped up value and no
> taxes would be due upon immediate sale. This, of course,
> requires fully trusting the dying wife not to change her
> will. Would this also work with other assets, such as
> stocks, bonds, vacation house, etc (excepting insurance
> which would have a 3 year look back)
Or, in this instance, appreciated property that you gave
to the decedant, which ha a one-year lookback.
See 2006 IRS Publication 550, page 43, third column.
If within the one year lookback you gave appreciated property
to the decedant, and inherited it, your basis is not FMV on
date of death; it is decedant;s basis, hich of course is your
basis. So this scheme does not work.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>
|
| Similar Threads | Posted | | Capital gain on home sale? | July 8, 2008, 1:10 pm |
| Capital gain on land sale (proceeds used to buy vacation home) | March 25, 2007, 11:47 am |
| Questions re treatment of long term capital gains on home sale | July 19, 2008, 1:47 pm |
| Short Term gain vrs long term gain on sale of a rental house | April 11, 2006, 3:31 am |
| Home improvements to reduce profit from home sale? | October 24, 2006, 7:27 am |
| capital gain question | March 31, 2007, 9:55 pm |
| Large Capital Gain (anything I can do?) | April 16, 2007, 4:44 pm |
| capital gain of a decedent | February 17, 2008, 5:06 pm |
| 1040D Real Estate Sale/Gain-Improvements... | March 19, 2007, 2:04 am |
| excluding capital gain on residence | January 19, 2007, 1:01 am |
|
|
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap