Capital Gains and Losses
Questions and comments about tax rules for buying and selling stocks, mutual funds, real estate and other assets.
Capital Gains with Multiple Owners
Posted by: altonig, May 5, 2017 10:58PM
5 Siblings purchased a condo for aging parents in 2013, each committing to 20% of the cost. 2 of the siblings paid cash for their portion and the other 3 needed a mortgage for the remaining amount. The mortgage was taken in only 1 sibling's name and he is the only one listed on the Property Deed. Unfortunately both parents have now passed away & the condo needs to be sold. We received some advice that the other 4 siblings can be added as property owners with a Quitclaim Deed, this would then take the Capital Gains tax burden off of the solely listed sibling. Is there a time restriction of ownership with a Quitclaim Deed in terms of selling? Is this the best way to handle this situation or is there a way to distribute the capital gains among the 5 with only 1 being on the deed?

Re: Capital Gains with Multiple Owners
Posted by: Drewremedy, May 6, 2017 12:04PM
I think adding names to deed right now might be counterprodctive as to establishing 2013 as a date for long term gains .

IF there was a clear agreement at the time as to 1/5 shares each and that in fact took place , I might research if some version of equitable ownership arose in 2013 ....and it's relatively simple for someone who gets the funds to allocate 4/5 back to other equitable owners ...and attach a short clear explanation ..if IRS doesn't challenge in 3 years it's a done deal.

Re: Capital Gains with Multiple Owners
Posted by: MadDog, May 6, 2017 05:45PM
Agree with drewremedy with some variation. If your argument is title transferred through quitclaim there is a gift. Same holding period but need for gift tax returns.

The reality is that all were owners from day 1, that just was not documented in title. But the one acted as an agent for the others.

Try a google search for the Supreme Court decision in Bollinger (1988) that relaxed the rules to find an agency relationship.

I would check the Bollinger factors and if you did attach an explanation reference the Supreme Court decision and how it fits your facts

Re: Capital Gains with Multiple Owners
Posted by: Benn, May 7, 2017 07:56PM
Why not use a Nominee Distribution to transfer the capital gain from the sibling listed on the deed to the other siblings who also co-owned the property? If the closing agent sent one form 1099-S to the one sibling listed on the deed, the portion of the proceeds that actually belong to the other siblings can be distributed to them with a nominee distribution.

See the instructions for form 8949 for the processing of a capital gain nominee distribution and the use of Adjustment Code "N". Also see Pub 17, chapter 16, section on Nominees (Pub 17 (2016), p.116.)

Better still, ask the closing agent to send a multiple number of forms 1099-S, one to each sibling, reporting the amount attributed to each one. For this alternative, the closing agent would probably require affidavits from each of the siblings to establish the percentage of ownership of each one, and to establish that the ownership had existed in that manner from the outset.

Re: Capital Gains with Multiple Owners
Posted by: Drewremedy, May 8, 2017 12:17AM
Yes It might make sense to have 5 equal checks issued...but some disbursing agents insist on cutting but one check..make sure the closing agent will cut the checks 1/5 each beforehand....



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