Transferring equity while avoiding capital gains.

[Owen Boller]

Hi BP Community,

My brother and I are looking for guidance from NY real estate attorneys and CPAs on the cleanest way to restructure ownership of our primary residence to establish equal 50/50 legal ownership without triggering unnecessary tax liabilities or transfer taxes.

Property & Context:

• Location: New York State (2 separate legal lots)

• Property Use: Main house (primary residence for both of us) + an Airstream rented occasionally (a few weekends per year) + small outbuildings (sauna, gym, garden shed, pole barn).

• No Mortgage

• Purchase Basis: ~$138,000 | Current FMV: ~$750,000–$850,000 (appraised)

• Current Title: 100% in Brothers A's name

• Financial Reality: Brother B has paid a significant portion of property taxes, insurance, utilities, and capital improvements since 2022 (fully documented)

• Goal: 50/50 Tenants-in-Common (TIC) ownership held via separate NY-situs revocable grantor trusts for privacy/estate planning. No immediate plans to sell.

Questions for the Community:

1. Section 121 Capital Gains Exclusion & Equitable Ownership:

   • If held 50/50 as TICs through separate revocable grantor trusts, does this preserve our ability to claim $250k each ($500k combined) under IRC Sec 121 upon a future sale?

   • Brother B has resided here as his primary residence since 2022 and paid substantial cap-ex/taxes. Can we establish "equitable ownership" back to 2022 to avoid resetting the 2-year ownership requirement for his 50% share?

2. Federal Gift Tax & NY Estate Tax Implications:

   • Does adding Brother B to the deed require a Federal Gift Tax Return (Form 709), even if well within the lifetime exemption?

   • How does NY State’s estate tax cliff ($7.35M in 2026) and 3-year gift lookback/clawback rule impact a 50% deed transfer? Is documenting past financial contributions as consideration preferable to a gift transfer?

3. NY Real Estate Transfer Tax (RETT):

   • Since no LLC or corporate entity will hold title, does a 50% deed transfer to a sibling (or to revocable grantor trusts) for nominal/zero consideration trigger NY State RETT or Mansion Tax?

4. Airstream Rental (Sec 280A(g) & LLC Overhead):

   • We rent the Airstream <15 days/year under Section 280A(g) (Augusta Rule). A standalone LLC handles guest bookings and operational expenses.

   • Does having the LLC pay for property overhead or improvements create liability exposure or commingling issues since the LLC does not hold title to the real estate?
     

Thanks in advance for any insight!