Q:

Subject: Questionable taxes due for 2006?

My partner an I are co owners / co borrowers of a residence we have resided in since 2000. We are in the process of disolving this partnership and she will be buying out my share of the property and assuming all loans and debits. My question is, on the money I receive, will I need to pay taxes on it for the year of 2006? The residence was not sold nor refinanced but her att. said we needed to have the residence appraised and that the monies given to me have to be filed as income? Can you Help???

It sounds like you are selling your half of the home to your co-owner; so this will need to be reported on Schedule D of your 1040.

You didn't give any figures, but if your profit on this sale is under $250,000, it should be tax free. 

You should have been keeping tabs of your cost basis in your half of the home, starting from the original purchase and including any capital improvements you've made up until the time of your sale.  Subtract that from the value you assign for the buy-out and you will have your profit.

If the profit on your half of the home is over $250,000, you will have a taxable long term capital gain.  What you do with the money will make no difference whatsoever on the taxation of the home.

This isn't very complicated, so any tax pro should be able to help you report it properly on your 1040.  I have all of the rules on home sales on my website.

Good luck.  I hope this helps.
 
Kerry Kerstetter

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 4/06/2006 12:07:00 PM Send this post: