Buying or Selling a Home/Sale of Relative Home
In 2004 my son paid off the mortgage of my townhouse by refinancing his home and including $68,000 for my townhouse. I have remained in that townhouse since December, 2013 and have not paid any mortgage/rent payments since 2004. I went on disability in 2002.
He sold the home in 2014 and I moved in with him in DEC 2013. What are the tax/equity problems that may occur from this sale?
Thank you very much,
Before I can answer your question, Judie, I need to know in whose name was the townhouse registered? If the townhouse has been in your son's name all this time, then it would be considered to be his rental in the eyes of the IRS. And if it indeed was his rental all this time, then he may have a long term capital gain (if indeed he sold it for more then the cost of him gaining ownership) to pay.
Plus, as the owner of a rental, he needed to declare a yearly depreciation rate that would affect his basis for the rental (townhouse), which in turn may cause him to pay more in capital gains upon its sale.
I would prefer to believe that your son took care of any tax obligations he may have had (he doesn't have to be concerned with any gains until he addresses he 2014 taxes next year) I strongly recommend that he consult with a CPA or tax attorney to make sure his interests are preserved. As long as the townhouse has not been in your name since before 2004, you should not have to be concerned taxwise . . . that is if you never did own the townhouse. If you did, then you may need to check with that tax expert to see if you have no tax obligation. I do wish you well.
Dick Dennis, California Real Estate Broker