Capital gains Question

Ok so far. But please explain a little more why you were getting half interest if you were not investing any money.

I'm also confused about this. Why in the world would you do that? How does that protect the investment?

Conceptually you can claim long term capital gain treatment because you were an equitable (if not a legal) owner for the entire time. There are several potential problems, however, and that's the reason I asked the questions above. Answers to those will need to be determined before your ownership can be justified. First of all, the reason the property was put only in your brother's name will have to be reviewed. You will have to justify that it was a legally reasonable thing to do if you were actually a half owner. Also you appear to have received a half interest in property but gave nothing in exchange except for your services. If that's true you should have recognized taxable income at the time in the value of the property you received. If you didn't, that could be a problem. Stu

Sounds fair to me.

WOW! I knew what the next paragraph would be before I read it.

Make certain the settlement stipulates that you were to unnamed partner.

Dick

Hopefully, the jt venture papers were filed indicating the date that you & your brother purchased the property. Looks like you should be able to to report the sale as a (long term) capital gain. But, from your message your basis appears to be zero. You should consult your own CPA/tax advisor. ___________________________________

-----> real address on hobokeni or hobokenx

He didn't get a half interest in the property. He got a half interest in the profit.

It protects the person who put up the money, since he owns the property.

To protect the person who put up the money.

He wasn't a half owner of the property. Initially, he had a

No, a half interest in the potential *profit*.

What is the taxable value of a half interest in the excess sale price over $100,000 for property whose current market value is $100,000? Seth

If it's a partnership, getting half interest in the profit means half interest in the partnership. Otherwise he'd simply be a hired hand.

It's not much protection if it turns into a lawsuit. They should have had a partnership agreement explaining all that. Otherwise that kind of "protection" can be meaningless.

Again, legally he had no interest in the property per se. But if it were a partnership and he was entitled to half the proceeds from the beginning, he was immediately half owner of the partnership.

It's what a willing buyer would pay, of course. How much would you pay for that? It's certainly worth more than nothing if you can just sit and wait for the property to increase in value, with no downside. Stu

It's protection against OP's debts causing the property to be seized.

He was _not_ entitled to half the proceeds. He was entitled to half the _profit_. The correct structure would, I think, have been to set up a partnership, which then _borrowed_ money from his brother to buy the property. He'd own half of an indebted partnership.

I'd suggest not paying much, because the owner might immediately sell the property for no or very little profit. Seth

Partnerships are quirky things. A partner need not have the same percentage interest in the assets as they do in the profits.

Tis true. The partnership agreement should have clearly spelled out the situation and what will happen. Maybe this was one of those "loose" partnerships.

It sounds like he didn't.

Not so. The partnership default is by percentage ownership, but the written agreement should have clearly stated that this partner received half the gains and profits upon the sale. Me thinks there wasn't any written agreement here.

-- Paul A. Thomas, CPA Athens, Georgia

You say that you came to own this land because of your inspiration and efforts. That sounds like earned income to me, in my non-expert opinion.