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You may decide that tax ought not to be due when you take one of the houses, but under the law it IS due. For me to take one of the houses, we would have to cha
by URSpider94 8y ago
You may decide that tax ought not to be due when you take one of the houses, but under the law it IS due. For me to take one of the houses, we would have to change the ownership structure and there would be a transfer price for that.
- credit_guy 8y ago> change the ownership structure and there would be a transfer price for that The transfer price in gp’s example would be zero, wouldn’t it.
- URSpider94 8y agoProbably not. If the transfer price is zero, then that now becomes my tax basis in the property. So assuming again that I put in $100k originally, and now take out one house worth $150k, then sell it, I’m going to pay capital gains on the full $150k, not just my $50k gain. What probably happens is that I sell you my share in the holding entity for $150k, and the entity sells me the house for $150k. There are cases where you could simply dissolve the entity and distribute the assets, which would avoid the sale and resulting taxes, in which case you’re just re-titling it and not selling it. Tl;dr: this gets complicated really quickly.
- sokoloff 8y agoThat's very much facts and circumstances dependent. As an example, if we individually purchase the property and form a partnership with that property (rather than the cash), a subsequent distribution of that property is not federally taxable (pub 541). Similarly, ownership changes relating to a divorce are generally not currently taxable.