Capital Gains Tax
I signed for my daughter's house, her name is not on anything, it is listed as an investment property and she rents it. She pays all of the mortgage payments to the mortgage company from her and her bank for the exact mortgage price. I have not made any income on the house. It will be 2 years that she has lived in the house in October. She wants to move so we are going to sell it. I need to know if I will be hit with Capital Gains Tax and if so how much is the tax? Also, is there any way around this or is inevitable that I will be hit with it? Thanks.
EScissorhands,
Yes, you will be hit with capital gains, however, there is a way of postponing this. With regard to the capital gains tax there are two components. The federal tax rate was lowered in May of last year from 20% to 15%, however, the amount of gain due to reduction of basis through depreciation is taxed at 25%. This is not likely to be very much in your case.
The good news is that you can exchange this property for another property and defer the capital gains through a 1031 tax deferred exchange. This may not suit your needs if you are looking to get out completely, but it is a useful tactic for real estate investment.