Expert: Dick Dennis - 3/12/2007

Question
My brother and I bought a house as joint tenants in 1998 in Tempe, AZ for
$112,000.  I lived there until January 2002 and he still lives there with his
wife.  I am now ready to buy my own home and I have told him to buy me out
or sell the house, which he has agreed -- one or the other, he just has not
decided on which one.  Homes in the area are now selling for about
$270,000.  I would like to take some of the equity for a down payment.  Do I
have to live there for 2 out of the past 5 years in order to not pay tax on the
capital gain?  Or is it okay because he has lived there?  What kind of taxes
should I expect to pay?  Also, if he decides he would like to stay in the house,
should we refinance?  What route would you suggest?

Answer
As long as you held title with your brother for two out of the past five years, then you qualify for skipping having to pay any capital gains tax up to $250,000. If you moved out five years ago, then obviously you have not lived there for the past two years. You would be liable for a capital gains tax based on your tax bracket. I suggest you consult with a CPA or tax attorney or a tax expert.

I do wish you well.

Dick Dennis