Selling to relative

9 Replies

Hi all!

I bought my first home in 2010 and lived in it for two years before I purchased my new home. It is currently a rental with a great tenant. I am considering selling this property soon so I can avoid capital gains tax.

I told my mom my plans and she wants to buy it as soon as her deal is done with her multi-unit complex.

My question is how can we do this without an agent? The house was bought in cash and my mom's name is under mines on the grant deed. What is the best way to go upon this situation?

I would be using the money to put down on a new home.

@David L.

Your lawyer should be able to solve all of your title issues. You'll still need to clear the title and details along those lines. Plus I'm guessing our mother is using a conventional mortgage, so most of the rest of the details will come from the mortgage company.

Hi @Aaron Montague .

She is doing a 1031 exchange with a property purchased in the 80s.The home is now paid off. She wants to sell all the properties further than 30 miles and move them closer to home as she is getting ready to retire.

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Ah. Definitely a good CPA and a lawyer. Make sure everything is on the up and up on the 1031 exchange. You still don't need an agent for the transaction between your mom and yourself.

The simple way ....quit claim...your part to her. You can use a para legal service , to do it. seeing that it has been depreciated, your tax person should be notified first.

All your moms out of town sales should be exchanged into more favorable, to defer cap gains, if that is the case.

Exchanges are tricky, and a title co. will give you a specialist to guide you through the mine field.

@David L.

If I understand the scenario correctly, you and your mother are co-owners of a rental property that used to be your primary residence. Sometime in 2012, you converted your primary residence to a rental, and you want to sell this property while you are still eligible for the Section 121 capital gains exclusion.

As long as you lived in the property at least two years of the five tears prior to sale, you can exclude the capital gain due to appreciation on your half of the sale profit. The portion of the capital gain due to unrecaptured depreciation will still be taxed.

There are special rules for a 1031 exchange when the replacement property is acquired from a family member. It can be done, but professional guidance is recommended.

Buying from a related party will generally not work. In your case, because it is your primary residence and you will likely pay no taxes under Section 121 (121 Exclusion), your mother's 1031 Exchange into your property will likely not qualify. I would be happy to provide citations, if you need them.