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  1. #1
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    Default Re: Gains on Jointly Owned Real Estate -- Can They Be Designated to One Person

    Quote Quoting flyingron
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    NO Jimmy, you own percentages based on what it says on the deed JOINT or TENANTS IN COMMON. If no apportionment of shares are made, you are presumed to have equal shares in ownership. A joint owner can always convert (unilaterally) his interest to tenancy in common.

    As far as the IRS is concerned as long as 100% of the gain is apportioned to one or more of the owners they're happy. Note that a gain from someone in the business of flipping is NOT a capital gain, it's ordinary income.
    Joint Tenants always own an identical and equal portion of the property and equal rights to the entire property – if there are two tenants, they each own 50%, if there are four, they each own 25%. Tenants in Common can specify ownership interests. Can you cite some authority that states otherwise? I don't mind being corrected if the correction is actually true.

    It would be hard to argue that flipping a single house constitutes being in the renovation business.

    The IRS' position is that you should allocate gains according to ownership interests unless you are in a community property state. Otherwise, I could be in a very high tax bracket and push a capital gain to my wife's separate return and have it taxed at the zero percentage rate. That is not allowed. It is no different for a house than it is for a joint stock brokerage account.

  2. #2
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    Default Re: Gains on Jointly Owned Real Estate -- Can They Be Designated to One Person

    You are correct, I am sorry. In Pennsylvania, there must be a unity of interest in joint tenancy. That's not universal (for example Connecticut allows otherwise).

    I didn't argue one house was a business, it was just a warning that if they were engaging in such a business that this would be income rather than capital gains (yes provided it's not held for longer as an investment/rental use). However, most people use "flipping" for shorter term than that.

  3. #3
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    Default Re: Gains on Jointly Owned Real Estate -- Can They Be Designated to One Person

    Quote Quoting flyingron
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    You are correct, I am sorry. In Pennsylvania, there must be a unity of interest in joint tenancy. That's not universal (for example Connecticut allows otherwise).

    I didn't argue one house was a business, it was just a warning that if they were engaging in such a business that this would be income rather than capital gains (yes provided it's not held for longer as an investment/rental use). However, most people use "flipping" for shorter term than that.
    I agree, but its not uncommon for a "flip" to take longer than a year, for one reason or another.

  4. #4
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    Default Re: Gains on Jointly Owned Real Estate -- Can They Be Designated to One Person

    It once took me just under a year to flip a house, but the capital gain was not a concern because I'm a bad enough investor that I had plenty of capital loss carrying forward to cover it

  5. #5
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    Default Re: Can Capital Gains be of Joinly Owned Property be Allocated to One Person

    If you're in the business, just under a year is income and you can't use capital losses to cover it.

  6. #6
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    Default Re: Can Capital Gains be of Joinly Owned Property be Allocated to One Person

    Quote Quoting flyingron
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    If you're in the business, just under a year is income and you can't use capital losses to cover it.
    Obviously Bubba isn't "in the business".

  7. #7
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    Default Re: Can Capital Gains be of Joinly Owned Property be Allocated to One Person

    Actually, if buying and selling houses was my trade then the length of time wouldn't matter at all. It would not be a capital gain regardless of how long the project took. In my case, I bought a couple of houses in 2005 when prices were skyrocketing and held them while they appreciated. Almost held the 2nd one too long. You can buy and sell a lot of investment assets without being "in the business." The nature of the asset doesn't determine this.

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