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Need advice on this tax question!
Okay, so I have a tax dilemma and would like some advice before I make a decision. Here is the story...
My parents bought a house for me a few years ago with cash, with the deal being I make payments to them every month to pay them back. I have since completly remodeled the house and have approximately $85,000 in equity. I am getting in to buying rental properties and flipping houses I am now ready to sell my house to use some of that equity to buy an apartment complex. The only problem is....the house is still in their name. I need advice on the best way to get the equity without getting killed in taxes.
I have thought getting a loan for the remaining amount that I owe them, but with me not owning it for two years, I'd have to pay capital gains tax when I sell it.
The other option is for my parents to sell it and then give me the equity, but they would have to pay a gift tax.
I'm not sure what to do and any advice is greatly appreciated!!!
Thanks,
Cade
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- Tax Strategist| National Tax Educator| Accepting New Clients
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If they...gift you the house then you sell it your basis will = their basis = gains for you
If they sell it then gift you money = gains for them but no gift tax because the exclusion is like 11 million. They'd have to file because they'd be above the annual exclusion but shouldn't pay tax.
If they sell it to you for a loss then you sell it = capital gains for you again
Was the house a rental when you went ahead and renovated it? They should QC you onto the property and then you can do a 1031 exchange if it was an investment property.
