Seeking tax and legal advice regarding property sale
Hello, this gets a little long. I just want to get a little outside perspective/reality check before I make this big step.
I'm thinking of selling my townhouse to my son to take the advantage of the Capital Gain Sale Tax break. He is my sole heir, so I'm very loose with the actual funding transfer. However, I would like to have the transaction properly documented for tax record reasons.
Questions and details:
1. I lived in this property for 15+ years but for the last 2 years, this property has been used as rental income. If I sell it to my son for a fair market price before the 3 year's rental ends, can I qualify for the Capital Gain Sale Tax break? (Even if the buyer is my son?)
2. My son will pay 2/3 of the sale price with his own funding. I will loan him the remaining 1/3rd (seller financing). What is simplest way to document this? Will a note from an attorney be enough?
3. The current tenant knew that during his lease term, I might sell the property to my son, but that his lease contract will be honored. He agreed to this. Is there a need to draw up a new contact between my son and the current tenant for the rest of the lease term?
You will need a mortgage contract with your son for the amount you are loaning him. This would qualify as an "installment sale". You can learn more from reading IRS Pub 537, Installment Sales: http://www.irs.gov/pub/irs-pdf/p537.pdf
Sat Aug 22, 2015 9:57 pm
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