Posted on: 25th Sep, 2006 09:51 am
My mother passed June 05, before her passing an attorney suggested placing the property in her childrens names. Our question is what are the tax consequences of selling this property. We have been told the tax would be 35%, and then told that if it was sold after 2 years of the transfer it would reverty back to 15%. We cannot seem to get a difinitive answer. The property is located in Central Florida. Thanks.
Hi Kenwig,
Capital Gain Taxes do apply but after you cross the exemption limit.
The exemption is upto $250,000 in profits from the sale of the house if you have used the house as your primary home and prior to selling it you have been living in the house for two years out of a total of five years. These two years also need not be consecutive.
Thanks
Firth
Capital Gain Taxes do apply but after you cross the exemption limit.
The exemption is upto $250,000 in profits from the sale of the house if you have used the house as your primary home and prior to selling it you have been living in the house for two years out of a total of five years. These two years also need not be consecutive.
Thanks
Firth
Hi Kenwig,
The tax rate is depended on whether it is a long term or short term capital gain. It would be a long term gain if the property is held for more than one year before its sale and short term if less than that period. For long term gains the rate is 15% for 25-percent or higher income tax brackets and 5% for people in two of the lowest income tax brackets of 10 & 15 percent.
And short term capital gains which are gains on property held for less than one year have higher rates, the rates equal to normal income tax rates. You will have to check in which income tax bracket you fall and also whether you will be crossing the capital gain tax exemption limit.
Thanks
Colin
The tax rate is depended on whether it is a long term or short term capital gain. It would be a long term gain if the property is held for more than one year before its sale and short term if less than that period. For long term gains the rate is 15% for 25-percent or higher income tax brackets and 5% for people in two of the lowest income tax brackets of 10 & 15 percent.
And short term capital gains which are gains on property held for less than one year have higher rates, the rates equal to normal income tax rates. You will have to check in which income tax bracket you fall and also whether you will be crossing the capital gain tax exemption limit.
Thanks
Colin
Hi Kenwig,
I don't think capital gains tax will apply here, as the property is not being sold. The property will just be transferred in the names of the children. This can be done through a quit claim or grant deed.
Your mother may have to pay gift taxes for transferring property to her children. If the house (which may be the gift here) is worth beyond $1 million, then she has to file a gift tax return with the Internal Revenue Service when she deeds the property to the children as gift.
Know more on Gift Taxes from our previous discussions. You may further consult an accountant for more details on how this type of transaction may affect your taxes.
Thanks,
Caron.
I don't think capital gains tax will apply here, as the property is not being sold. The property will just be transferred in the names of the children. This can be done through a quit claim or grant deed.
Your mother may have to pay gift taxes for transferring property to her children. If the house (which may be the gift here) is worth beyond $1 million, then she has to file a gift tax return with the Internal Revenue Service when she deeds the property to the children as gift.
Know more on Gift Taxes from our previous discussions. You may further consult an accountant for more details on how this type of transaction may affect your taxes.
Thanks,
Caron.
Thank you for your responses. It sounds as if our next step is contact a good tax accountant, rather than an attorney which is where we were getting the conflicting answers.
yeah kenwig, even i feel it's time to consult a tax accountant. I had once taken help from one of them and believe me, a professional accountant can be really helpful to you.