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Should I add my son's name to my home's title for a better exemption?

October 19, 2006


I am divorced and I plan on selling my home during 2007. I am the sole owner of the home. I am considering adding my 17 (almost 18) year-old son on the title to qualify for a $500,000 exemption instead of $250,000. We have both lived in the home 24 of the last 60 months.

Comments?

Answer

Date:  04 Oct 2006

Your son wouldn’t qualify to claim the exemption for a 2007 sale. In order to qualify for the exemption, the taxpayer must have owned and used the home as his or her principal residence for two years or more during the five-year period ending on the date of the sale or exchange. He wouldn’t meet the ownership requirement.

I question the wisdom of giving $250,000 or more to an 18-year old.

The transfer would be a taxable gift, which should be reported on a gift tax return and would use some of your lifetime exemption equivalent for taxable gifts.

If you just changed the title but kept the proceeds of the sale, the transfer would be disregarded as fraudulent, the exemption would be limited to $250,000 and you would be subject to some nasty penalties.

I don’t think this is a good idea and wouldn’t consider of doing it myself.

Good luck!


Mike Gray

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IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this website was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

Should I add my son's name to my home's title for a better exemption?

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