Splitting Property

The simplest method is since you both shared the mortgage payment/expenses, you first get your $2400 off the top, and the partner gets $21,600 (the original down payments), you then share the appreciation 50/50. This would ignore the time value of the down payments, so the partner might object. Maybe applying the rate of the mortgage to the down payment money for each of you, so the $24,000 at, say, 8% (rates were higher then, did you refinance at all?) over 16 years would be $82,222. So 10% for you, $8222, and $74,000 for partner. Then split what remains. Forgive the question - why wasn't this discussed up front? The two methods I offer yield very different results. JOE

That's a really good exercise there. It would take me maybe two or three hours to work it out for you, and i would charge accordingly. Hope you have good records.

Now where are those thumb tacks?

Holiday ChEAr$, Harlan Lunsford, EA n LA

I'm assuming that this residential property is, and has been, the personal residence of the two of you, with no business use or rental. If incorrect, let us know, as the answers will be different. First, the mortgage interest and property taxes paid over the years were (assuming you itemized deductions) deductible in the year paid. They DO NOT add to the basis of the property. Insurance is a personal expense of the homeowners and is never deductible. Second, determine your individual "cost basis" in the property. This is a little different than just splitting the original purchase price in half, as you each put up differing down payment amounts. $21,600 by your partner ($120,000 x 20% x 90% = $21,600) and a lesser amount of $2,400 by you ($120,000 x 20% x 10% = $2,400). Total $24,000. Subtract the down payment from the purchase price ($120,000

- 24,000 = $96,000) and divide by two ($96,000 /2 $48,000). You did say all monthly payments were shared equally, right? Net cost basis is then $69,600 (58%) for your partner and $50,400 (42%) for you. There are several ways you can calculate your individual "gain" on the sale:

The way specified in the written agreement you had when you bought it. Don't ever again buy property with other than a legal spouse without such an agreement on the front end. It ensures that you won't be mad at each other over misunderstandings about the property when you sell. You and your partner need to sit down and decide what kind of split seems right to both of you. Assuming you can do that, people here can advise about the tax aspects.

-- Phil Marti Clarksburg, MD

you might study this for some ideas, the most important of which is to come to an agreement and reduce it to a writing BEFORE you do stuff like this.

Herb - Correct. This is a residential property.

Another caveat that I would like to throw in here is that my partner may end up keeping the property. In order words, she will take over the remaining payments, while I will be opting out of the partnership/deal and hopefully walk away with my share. How should this be dealt with? Thank you all for your insights and advices!

Maya.

We were very very naive.

The best way to deal with this is to treat it as if she made a loan to you of half the down payment. You get half the appreciated value, less interest on half the down payment for the years since the property was purchased. She pays you that amount, and that should do it. Stu

Amen! Besides describing partnerships with uneven participation, the contract must cover what happens when things go wrong, which may be more often than you think. Usenet postings and courts are full of partnerships gone bad. Fortunately you havent reached that stage.