Posted on: 03rd Jan, 2011 10:33 am
I am a real estate broker. I would like to start buying rental property with a partner. A property that he is interested in located next door to his personal residence. He would like to purchase the house without his neighbor knowing that he is the buyer. So we agreed that I would buy the house 100%. If I decide to later within a year to own the house equally with him what is the best way to transfer ownership to him without incurring state and federal tax obligations? Also, if I decide within a year to transfer the house at 100% to him what is the best way without incurring state and federal tax obligations? I live in Michigan. Thank you.
Hi bddevine!
Welcome to forums!
You will have to sign a quitclaim deed or a warranty deed in order to transfer the property to your partner. However, if it is a gift transfer, then you'll be liable for paying gift taxes. However, if you sell off the property to your partner and receive profits, then you'll be liable for paying capital gains taxes.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
You will have to sign a quitclaim deed or a warranty deed in order to transfer the property to your partner. However, if it is a gift transfer, then you'll be liable for paying gift taxes. However, if you sell off the property to your partner and receive profits, then you'll be liable for paying capital gains taxes.
Feel free to ask if you've further queries.
Sussane
Thank you Susanne. So if I sell the property to my partner fo the same price I purchased it - I should not expect any fedral or state taxes?
Hi Brinda!
Welcome to forums!
In my opinion, you're correct. If you sell off the property to your partner for the same price that you purchased it for, then you won't have to pay federal taxes.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
In my opinion, you're correct. If you sell off the property to your partner for the same price that you purchased it for, then you won't have to pay federal taxes.
Feel free to ask if you've further queries.
Sussane
I'm assuming you're not using cash or you could just close in trust.
How long do you need to conceal the identity? Until you've reached price? Through closing? For an extra year? Quitclaims don't fix anything. If the property is mortgaged, they create new potential problems.
Pretend the neighbor wasn't a part of this...what's the goal? Half? As in, each put up half the down payment, sign the Note/Mortgage, and split the gain/loss to Sched E?
I'm not qualified for tax advice, but my CPA is. I've definitely seen tax returns where they were allocating income/expenses on properties to Jack & Jill where only Jack or Jill was on the Note. Downside for you there may be on the sole liability for the Note.
I'd get with a CPA or attorney.
How long do you need to conceal the identity? Until you've reached price? Through closing? For an extra year? Quitclaims don't fix anything. If the property is mortgaged, they create new potential problems.
Pretend the neighbor wasn't a part of this...what's the goal? Half? As in, each put up half the down payment, sign the Note/Mortgage, and split the gain/loss to Sched E?
I'm not qualified for tax advice, but my CPA is. I've definitely seen tax returns where they were allocating income/expenses on properties to Jack & Jill where only Jack or Jill was on the Note. Downside for you there may be on the sole liability for the Note.
I'd get with a CPA or attorney.