Is this residence transfer tax-free?

NadCixelsyd · 2018-02-28T01:57:56+00:00

Is this kosher? In 2007, Anne bought a small one-bedroom condo for $240k. She lived there. She married in early 2015. She and hubby needed bigger quarters. In September, 2015, they moved to bigger quarters but kept the condo and rented it out. The condo is now worth somewhere between $400k and $600k, but probably around $450k. If she sells the condo before September 1st, she will have lived in it for two of the previous five years. Hence, the profit is tax free. Even though hubby only lived in it for a few months, do they get the $500k exclusion? However, she really doesn't want to sell it. Case 1: Just suppose she sells it to Bob (her father) for $450k. Anne holds a 100% mortgage at a market rate of interest. Three months later, Bob sells it back to Anne for $450k and repays the loan. When Anne eventually sells the condo, is her basis $450k? Case 2: Suppose the sales "price" is $600k, the upper limit of acceptable. Is her basis now $600k? Case 3: Can she sell it to her hubby for the step-up in basis He never was on the original deed.