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  1. #1
    Join Date
    Dec 2012
    Posts
    4

    Default When are Taxes Due on Profit from Sale of a Residence

    A friend's primary residence is in New York City and he also owned a house in Florida where he spent winters. He was in a registered domestic partnership in NYC for many years and married his partner shortly after it became legal in the state. His partner lived in Florida full-time and was CO-OWNER on the deed, and died about six months ago. My friend was forced to sell the Florida house at a profit of about $100,000. [before deducting for improvements, etc].

    The tax code says that since the Florida house was not his primary residence he's not entitled to the $250,000 tax free profit on its sale. But the co-owner, his legal domestic partner/married partner was entitled to the deduction, which should pass to my friend and more than cover his profit.

    The $100M profit is only the difference between the original purchase price and the sale price, and I haven't considered calculating the book value of the decedents portion of the houses' value and whether that has any impact on the equation.

    Any thoughts? Is there any profit from the sale that needs to be declared?

  2. #2
    Join Date
    Sep 2010
    Posts
    19,901

    Default Re: When are Taxes Due on Profit from Sale of a Residence

    It works like this. He is not entitled to any of the $250,000 capital gain exclusion because it is not his residence. It does NOT transfer at all like you are imagining. However, the half of the house he "inherited" from his partner should have its basis stepped up to the value at the time of the partner's death. That should help a little bit.

    Further, other things factor into the basis other than the purchase price/sales price alone. If there were any capital improvements done they can be added to the basis. Any expenses directly involved in selling the place can be as well. The sales commission and other legitimate closing costs paid by the seller as well.

    If there is $100,000 in capital gain, and the death of the partner was sufficiently short ago that the house value hasn't really changed much, he owes capital gain on $50,000.

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