Ventucky Red
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- Jan 9, 2013
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Jon
Helping out my FIL set up his estate.. recently lost his wife and has not done anything hence the mad rush to do it now.. Yes we're doing all the stuff with setting up the trust etc.. but he ran something by me last night that just doesn't pass the "sniff test."
Here is the scenario:
Man and wife buy house and have a son - the man and wife were my in-laws neighbors and very close with other community activities.
The man dies, and his wife lives in the house – son had moved on many years prior... It is unclear how the deed was recorded or who had ownership on the title once the man passed away—IMPO I'm thinking Community property with right of survivorship or through a trust it was transferred to the son with the provision that the mother lives there…. this is the wild card where I don't have the facts.
Fast forward the son moves mother into a nursing facility and sells the house.
Son tells FIL that he had the property reassessed from the original tax roll value protected under Prop 13 to the present-day value of the home with the new property tax assessment and pays the pro-rated taxes. He tells the FIL that in doing so he avoided paying capital gains tax; that is, he paid the five months of property tax to avoid paying a much more significant sum in capital gains tax on the first $1.0 million in proceeds when the property is sold. The house was originally bought for $65K and the sold for $1.2 Mil.
Personally I am thinking this is a fish tale, but with the laws changing who knows what can get through the loop holes once or twice.
Anyone here ever heard of this?
Here is the scenario:
Man and wife buy house and have a son - the man and wife were my in-laws neighbors and very close with other community activities.
The man dies, and his wife lives in the house – son had moved on many years prior... It is unclear how the deed was recorded or who had ownership on the title once the man passed away—IMPO I'm thinking Community property with right of survivorship or through a trust it was transferred to the son with the provision that the mother lives there…. this is the wild card where I don't have the facts.
Fast forward the son moves mother into a nursing facility and sells the house.
Son tells FIL that he had the property reassessed from the original tax roll value protected under Prop 13 to the present-day value of the home with the new property tax assessment and pays the pro-rated taxes. He tells the FIL that in doing so he avoided paying capital gains tax; that is, he paid the five months of property tax to avoid paying a much more significant sum in capital gains tax on the first $1.0 million in proceeds when the property is sold. The house was originally bought for $65K and the sold for $1.2 Mil.
Personally I am thinking this is a fish tale, but with the laws changing who knows what can get through the loop holes once or twice.
Anyone here ever heard of this?
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