Randall Posted April 2, 2014 Report Share Posted April 2, 2014 Client sells half interest in his residence. Not been used as rental, just personal residence. Client continues to live in the home as his personal residence. I don't think the sale can qualify for the exclusion since he continues to live there. I think the sale of the half interest goes as capital gain as you would normally treat an installment sale. In the future when and if he sells the other half, that half would qualify for the personal residence gain exlusion (all other requirements being met). Any thoughts or comments on this situation are appreciated. Just wondering if I'm missing anything. Quote Link to comment Share on other sites More sharing options...
DANRVAN Posted April 2, 2014 Report Share Posted April 2, 2014 I don't see anything in the regs that would require the gain to be recognized. Quote Link to comment Share on other sites More sharing options...
Catherine Posted April 2, 2014 Report Share Posted April 2, 2014 He just cut his basis way down, so far as I can see. Nothing reportable now. Quote Link to comment Share on other sites More sharing options...
DANRVAN Posted April 2, 2014 Report Share Posted April 2, 2014 He just cut his basis way down, so far as I can see. Nothing reportable now. I agree, 1/2 of the basis went with the exclusion. Quote Link to comment Share on other sites More sharing options...
Richcpaman Posted April 2, 2014 Report Share Posted April 2, 2014 Randall: Do you have any more information? Who bought the 1/2 interest? What portion of the house/Property was sold? How much did the T/P sell it for? What was the basis in the entire property? What are the clients future plans for this property? Rich Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted April 2, 2014 Report Share Posted April 2, 2014 Just a guess, but sounds like he sold a half interest to a 'friend' who is now sharing the house. Girlfriend maybe? Seems to be no ta effect now, but OTOH I could argue differently if he actually divided the house into two separate units. Quote Link to comment Share on other sites More sharing options...
Randall Posted April 2, 2014 Author Report Share Posted April 2, 2014 More info now. Did not sell half interest. He and wife live in house. So called sale was to daughter and son-in-law. Now I'm wondering if it is even a sale. Buyers are going to obtain financing and purchase whole house at market value($455k). The agreement (personal) is for 'buyers' to pay 'sellers' $1336 per month until they obtain financing to purchase the house. I'm wondering if this is even an installment sale and not even a sale yet. But I'm wondering how to treat the $1336 received by buyer (my client). Could it be other income (sort of income for holding rights) or just deposits until financing is obtained and the real sale takes place. Or even gifts? I'm concerned not to blow client's personal residence exclusion. Basis is about $160k. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted April 3, 2014 Report Share Posted April 3, 2014 OK, that's an 'option', not yet a sale. Not income until the sale goes through. Still your client's residence until the sale goes through. Quote Link to comment Share on other sites More sharing options...
DANRVAN Posted April 3, 2014 Report Share Posted April 3, 2014 That is an interesting twist. They are making monthly payments like a lease with an option to buy but not living in the house. Do they have a contract? Quote Link to comment Share on other sites More sharing options...
Randall Posted April 4, 2014 Author Report Share Posted April 4, 2014 Danrvan, no formal contract, just a personal informal 'typed' summary of what they are doing. But even that has inconsistencies. That is why I was wondering if this should be reported as income of some sort, even if just 1040 line 21, or just added to contract price when sale takes place. If sale never takes place, it could be considered gifts, with double spouses, keeps it under the annual exclusion. Quote Link to comment Share on other sites More sharing options...
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