All Forum Posts by: Christopher Smith

@Lam N. One of the reasons I have property managers, never met a tenant in over 20 years and don't intend to meet one in the next 20.

If it was in fact a loan then it's simply a return of the loaned funds which would not typically be taxable (just a return of after tax dollars). 

What were the interest terms on the loan? Any interest received will be taxable.

Lower of cost or FMV when you put it into service.

You might want to explore beyond the Federal rules any 1031 provisions unique to California. If you were ever to sell the 1031 property (the one converted to a primary residence) with deferred gain that traces back to the original California property exchanged for it they might try to assert taxing jurisdiction. 

Non arm's length pricing

Readily apparent circular cash flow,

Form over substance, 

Preplanned,

and even advertised in advance,

what's not to like

Your tax basis (i.e., the amount used to determine gain, or the portion thereof that represents depreciable basis) will equal the FMV at date of death. In other words, your tax basis represents the step up (or step down) to FMV that occurs at date of death.

Does widely divided ownership in a realtively small real estate asset really make sense? Why not give the property to the one person best able to handle it, and then other assets to other folks to equalize as desired, or alternatively simply sell the property at death where there will be no gain and split the proceeds.

Encumbering the property changes neither your selling price or tax basis.

Give Joe Manchin a call.