avoiding tax on sell of residence, switch to rental

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  • John Pearson
    September 24, 2019 at 5:03 pm
    John Pearson

    young single couple, wedding plans for March, each owns SFR,
    can she sell her house to fiancé, he uses it as a rental, new higher
    cost basis, couple marries and lives in his, rents our her former.
    ISs there an arms length law which prohibits this.
    Advice and comments please.

    Jackie Lange
    September 24, 2019 at 5:18 pm
    Jackie Lange

    HI John

    She should just sell her house before the wedding. Since it is her personal residency, she will qualify for IRC 121 which means that she, as a single person, can make $250,000 profit TAX FREE when she sells her personal residency.

    Selling a rental property includes a 15-20% capital gains tax, re-capture of depreciation AND possible an extra 3.8% extra tax depending on the income bracket… ie, the government gets a big chunk of the profit.

    John Pearson
    September 24, 2019 at 5:55 pm
    John Pearson

    thanks Jackie, I agree with everything you said,,,yet is it ok to sell to her fiancé using
    the IRC 121, since they want to keep it as a rental after married ?

    Jackie Lange
    October 8, 2019 at 1:42 pm
    Jackie Lange

    Yes, she could sell to her finance and pay no taxes up to $250,000 in profit per IRC 121

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