Dear Edith: My elderly mother owns her home and my brother wants to buy it and move in to take care of her. If he buys the home for $400,000, that money goes into my mother's estate. When my mother passes away, would my brother then get back half of the $400,000? That seems like he's actually getting the house for $200,000. -- via askedith.com
Answer: When your mother dies, you and your brother each end up with $200,000 cash. Your brother also owns the house, but he had paid out $400,000 for it. Trust me, it's fair.
We can try it another way. Your brother ends up with a $400,000 house and $200,000 cash. That's $600,000 in all. But it cost him $400,000 of his own money to get there, so he really inherits just $200,000 -- the same amount you do.
He'll also have the satisfaction of knowing he's cared for your mother.
What About Taxes
Dear Edith: How could we (over 60 both) avoid paying capital gain taxes on sale of our home AND sale of a rental property? We must sell both to buy a more expensive house in a different location because of a new job. Can we take a once-in-a-lifetime tax exemption of up to ?? in profits? What about being forced to relocate after being unemployed?
What, approximately, will the tax be (if no other way we could shelter)? The rental was bought in 1991 for approximately $350K and we expect to sell for between $550K and $750K. Also, I heard something about recaptured depreciation, so how much depreciation expense will it be reasonable to claim over 22 years rented?
What exactly are the rules? -- email
Answer: On your main home, which I assume you've occupied for at least the past two years -- that's all it takes. You qualify. It no longer matters how old you are, and the tax break is no longer once-in-a-lifetime. You can sell and take up to $500,000 profit free of capital gains tax. (The figure is $250,000 for a single home seller.)
On the rental property, I wonder if you've been trying to do without professional help on your tax returns. You could have been claiming depreciation as an expense for 22 years, saving on your tax bills when rates were higher. The IRS has "catch-up" forms that would let you claim it now, but then you'd have to recapture it on the sale anyhow. This is definitely something to be figured out by your own accountant.
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