Source: The San Diego Union-Tribune
Writer: Robert J. Bruss,
a San Francisco lawyer, broker &
nationally syndicated real estate writer.

A Question of Title (August 20, 2006)
I am selling a condo that is in my daughter's name. I have lived in the condo for the last seven years and paid the mortgage payments. The sale will close the first of next month. It will show up as a $120,000 capital gain for my daughter. Can she use the sales proceeds to pay for another house for me to live in and claim it as a gift?

Because the condo was not your daughter's principal residence at least 24 of the 60 months before its sale, she is not qualified for the Internal Revenue Code 121 tax exemption up to $250,000.

Since your name is not on the title to the condo, although you paid the mortgage payments, you are also not eligible for the $250,000 tax exemption. Therefore, when the condo sale closes, your daughter becomes liable for the capital gain tax on her $120,000 condo sale profit.

It is a shame you and your daughter didn't consult your tax advisers. If you had done so 24 months ago, and if your name was on the condo title, then you could have deducted the mortgage interest paid and you would qualify for the IRC 121 principal-residence sale tax exemption up to $250,000.

Your daughter can give you up to $12,000 in 2006 without filing a federal gift tax return. Above that amount, she must file a gift tax return. However, if her lifetime nonexempt gifts have been less than $1 million, she will not owe any gift tax if she gives you $120,000 to buy another home.