How To Decrease Taxes On Payout From Property Sale| Fix/Flipped Family Member's House

[Chris Schwartz]

Hello BP Community, I need some advice! My family has been working to renovate a family member's house after they moved into a retirement home. Happy to report she is loving it there and very happy, much better off! We came to the following agreement in terms of home sale and renovation:

Owner claims $10k over what fair market value was prior to renovation ($210k). Family members claim any excess (aiming for a list price of $250k). 

Title Status: Sole ownership, transfer on death clause (to family doing renovations). 

What is the most efficient way to set this up at the closing table so that funds can be allocated with the least tax burden on all? Family trust, Gift funds, expense owner for hours worked and materials purchased? 

Thank you for your insight!

[Josh St Laurent]

@Chris Schwartz I see, because in your example the profit would be 40k non taxable to the seller, the taxes shouldn't be an issue when distributing to family members. Your family member that owns the house could simply write a check, send EFT/wire etc. to the other family members once the property is sold. If they exceed 19k to one person they'll want to file a gift tax form with their CPA at the end of the year, if they're married that 19k doubles so it's unlikely you'll run into any tax complications doing what you're doing.

Hope that clarifies things but lmk if I can answer anything else!