Property Transfer to brother with cash out

Guest 0.10 Dollars($)

Hi,

I lived me and my brother and parnets in a house which i bought 5 years ago. After I got married, I decided to move out the house and I wanted to transfer the house to my brothers name. My mortgage broker told me that I can sign the deed to my brother and he can refinance the house in his name. I bought the house for 200K and its worth now 300K. I wanted to get some money from the house (I only owe 170K). My mortgage broker told me that my brother can refinance for 220K, and my brother can give me the extra 50k. Do I have to pay income tax on the 50K.

Thanks

Guest 0.10 Dollars($)

Hi Tim,

I think that the money could be taxable because it is a kind of income on your part.

jenkin7 · Joined: 04 Jun 2007 Posts: 939 140.80 Dollars($)

Hello Tim,

If you are giving your property to your brother and he gives you 50k, then you have to pay income tax on it as that will be considered as gift.

I think you should first talk to your lender and notify him about your plan to transfer the ownership of the property. If you transfer the title without the lender's consent then he might call the entire mortgage balance due immediately.

Niicss · Posted: Wed Dec 19, 2007 5:32 am Post subject:

Has your brother agreed to do that?

Are you regular in making the monthly mortgage payments? Because the mortgage lender might require a 90 days seasoning for the new owner and a payment history from you before the refinance. And if you are not making regular payments, he might refuse to refinance.

You may take the 50k from your brother but I think that will be considered taxable income for you.

brad · Posted: Wed Dec 19, 2007 6:36 am Post subject:

If the mortgage is in your brothers name than he will get the tax hit. But either way someone is going to have to pay tax on the $50k as it is income that you have taken out of your homes equity.

Guest 0.10 Dollars($)

So what if I take a home equity loan for 50K before we do the refinance? or maybe i can still stay on the deed for 1%. Would I till have to pay taxes?

brad · Posted: Wed Dec 19, 2007 8:32 am Post subject:

I believe you are going to have to pay taxes regardless.

gmakerley · Posted: Wed Dec 19, 2007 10:17 am Post subject:

i submit that it would be beneficial for you to ask a tax advisor the question concerning tax liability. advice coming from laypeople may not serve you well.

jheard · Posted: Wed Dec 19, 2007 12:21 pm Post subject:

I believe that if the property is your primary residence, and you incur a capital gains of $50k on its sale, then if you reinvest the money into another primary residence within 2 years, the capital gains are exempt from tax.

Samantha · Posted: Thu Dec 20, 2007 5:10 am Post subject: RE: taxes after refinance

Well, had it been a sale, I would have agreed to Jheard. But this is just a property transfer after which Tim's brother would refinance and give him the extra cash. So, there's no capital gains here. And, as brad suggested, someone has to pay the tax, and probably it will be the brother himself because it doesn't matter how he utlizes the tax or to whom he offers it.

I am not a tax professional and this is just an opinion from my understanding, so I would still advice that Tim consult a tax professional.

God bless you.

Samantha

lisascherzer · Joined: 04 Jan 2008 Posts: 755 1.03 Dollars($)

Hi Tim,

If you have not lived in the property for 2 out of the last 5 years then you would have to pay capital gains tax which is lower than income tax.

lisascherzer · Joined: 04 Jan 2008 Posts: 755 1.03 Dollars($)

Tim,

Just wanted to add that capital gains is not based on what you owe. It is based on what you paid for the property and what you are gaining when you sell it. Basically, you are selling your half of the house to your brother. You have to subtract what you paid for your half from what you are recieving on the sale.

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