Hi,
My wife and I own our house in CA, we were thinking of selling and moving on soon but we could be liable for a lot of Capital Gains tax. We could clear about $1.5M so as it’s our primary residence and we have lived here for 12 years, and to keep it simple, assuming no improvements, we can get $500k tax relief and pay CG on the remaining $1M, correct? But, what if, two years ago when our 3 adult sons were still living in the house, we took the title out of our RLT and did a simple 5-way split on the title. Now we have 5 owners who have all been living in the house for the past 2 years (check 2/5). When we sell, can we now claim 5 x $250k ($1.25M) CG tax relief on a sale?
I’m not an expert in this area but I’m pretty sure that the 5-way split you described is a taxable gift. You might want to meet with someone to figure out a course of action if you didn’t pay gift taxes.
Thanks for your reply (this is Nick, original poster). We went through all of the proper channels to my knowledge with a highly rated tax and estate lawyer in Palo Alto. They said there is a large gift tax threshold (~ $6M or so) that you have to cross with each aldult child before paying any gift taxes and we did record all this with the IRS on the appropriate forms. Anyway, we’re now thinking of keeping the house as a rental so we’re probably going to put it back into our RLT (trust). Dirt in Los Altos, CA is not easy to come by now!