Tax Exclusion
Briefly, my six brothers and sisters own my parents old home where we all grew up. The house is paid in full (free & Clear), and currently my sister has lived in it with her family for the past 7 years. We all agree to sell the house to her and her family and split the proceeds between all six members. She currently has a re-finance loan approved to get the cash to pay everyone off. I would like to us this tax exclusion so that we can all cash out without paying taxes on our share by using her tax exclusion;
Any gain on the sale of your home is excluded from taxable income if you have lived in the home for two out of the past five years. The exclusion can be used as many times as you want in your lifetime, the only restriction being that the exclusion can only be used once every two years. An added bonus is that you don't have to keep every single home improvement receipt in order to know what the basis of your home is anymore. You also don't have to fill out any forms on your tax return. The exception is when you have a gain on the sale of your residence of greater than $250,000 (single) or $500,000 (married filing jointly). In this case you have to recognize any gain above $250,000 or $500,000 respectively, so you would have to keep track of all your receipts in order to increase your basis in your home when you sell.
My question is, can we take everyones name off the title to the house (quick deed?) so that only my sister and her husband are left on the title to the house, thus she can use the above tax exclusion? Then when escrow closes she can write everyone a check for our share, thus we do not pay any tax?
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