# Do I owe capital gains tax?



## davidjames200 (Jan 1, 2017)

I have somewhat a rare and unusual situation.

One of my relatives asked if he can put his house title under my name and I accepted without thinking about it. This was his only house. He paid all the costs such as mortgage, utilities, property tax, everything.

I took the title out of name after two years. The house has increased in value quite a bid. I did not make a single penny from it though I just transferred the house to him name after two years.

Do I have to pay capital gains tax on the house even though I did not make a penny from it? If yes. is there anyway around this? seems like cruel to be given a tax bill to someone who did not make a penny.


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## Bevdeforges (Nov 16, 2007)

As with most things, the devil is in the details.

When your relative transferred title to your name, was their any "token payment" that changed hands? (It should have been documented in the sales and/or title documents and for property in the US is probably a matter of public record somewhere.) That's your "basis" in the property.

Now, when you transferred the title back to your relative, those papers should similarly carry some sort of valuation or indication of the value exchanged - even if this is only the "token $1" for the transfer. Again, this would be documented in the public records somewhere. 

These two amounts are where you need to start in figuring any tax consequences.
Cheers,
Bev


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## davidjames200 (Jan 1, 2017)

He purchased his new house (he moved) under my name, he did not transfer the title I later realized it was a mistake. I was about 19 years old at the time and I did not know any better. I told him I want it taken out of name. Nothing was exchanged between us. I'm not too sure what token payment means, but nothing was exchanged between us.

Is there anyway I can not owe tax if I did not make a single penny? I did read some things about being a trust, but I do not fully understand it.


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## Bevdeforges (Nov 16, 2007)

US tax law is kind of weird in these cases, but you could contend that the transfer of the title back to his name is merely the correction of the original mistake of putting the house in your name in the first place. If he has been living there, he has disqualified himself from taking all the usual round of deductions - for the mortgage interest, etc. Or, if he has been taking mortgage interest, etc. then it's fairly clear that this was a sham transaction originally and shouldn't have been in your name in the first place. 

Whose name is on the mortgage? In any event, I think the onus is on your relative to clear this up - possibly to file amended returns for the years he didn't take the deductions he was entitled to take, etc. 
Cheers,
Bev


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## davidjames200 (Jan 1, 2017)

Bevdeforges said:


> US tax law is kind of weird in these cases, but you could contend that the transfer of the title back to his name is merely the correction of the original mistake of putting the house in your name in the first place. If he has been living there, he has disqualified himself from taking all the usual round of deductions - for the mortgage interest, etc. Or, if he has been taking mortgage interest, etc. then it's fairly clear that this was a sham transaction originally and shouldn't have been in your name in the first place.
> 
> Whose name is on the mortgage? In any event, I think the onus is on your relative to clear this up - possibly to file amended returns for the years he didn't take the deductions he was entitled to take, etc.
> Cheers,
> Bev


As far as I know he has been taking the mortgage interest deductions on his income tax. I will ask him just to be sure. Does that help my case?

Both our names was in the mortgage. He put 99% of the title in my name and 1% in his. So both our names was on the mortgage. But I did not make a single payment. All payments were from him.

Do things look better with the information I gave you? I sure hope so


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## Bevdeforges (Nov 16, 2007)

If you've never taken any sort of deduction in relation to the house on your taxes, and the shift in the names is solely a paperwork transaction, I would just continue along as you are going and ignore anything to do with the house on your tax returns.
Cheers,
Bev


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