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Property Transfer to brother with cash out

Posted on: 18th Dec, 2007 02:03 pm

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.

Hi Tim,

I think that the money could be taxable because it is a kind of income on your part.
Posted on: 18th Dec, 2007 11:24 pm
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.
Posted on: 19th Dec, 2007 04:07 am
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.
Posted on: 19th Dec, 2007 04:32 am
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.
Posted on: 19th Dec, 2007 05:36 am
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?
Posted on: 19th Dec, 2007 07:19 am
I believe you are going to have to pay taxes regardless.
Posted on: 19th Dec, 2007 07:32 am
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.
Posted on: 19th Dec, 2007 09:17 am
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.
Posted on: 19th Dec, 2007 11:21 am
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.

Posted on: 20th Dec, 2007 04:10 am
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.
Posted on: 20th Jan, 2008 07:10 pm

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.
Posted on: 20th Jan, 2008 07:12 pm
i have an apartment,bought $300,000 for investment(2006). i want to give this unit to my brother as a gift, i don't know how can i do this .
Posted on: 18th Dec, 2008 10:15 pm
Hi frank k,

You can use a quitclaim deed and transfer the property to your brother. You can get sample quitclaim deed forms online, but it is always better to draft it from an attorney. Once the deed is signed, you will have to notarize it and record it.


Posted on: 19th Dec, 2008 01:50 am
Hi my unit price is higher now and i never lived in it(rented out) do i have to pay tax on capital gain?
Posted on: 19th Dec, 2008 07:58 am
Hi frank k

As far as I know, you will have to pay capital gains tax for selling the rental property. However, if you can turn the rental house into your primary residence, stay there for 2 out of 5 years and then sell the property, such a sale will make you eligible for the capital gains tax exclusion.

Posted on: 20th Dec, 2008 01:03 am
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