What are the odds of selling 6/10ths of your property and getting the $500,000 tax exclusion offered by the IRS?

Asked about 1 year ago - Orange, CA

We have a former trusted HR Block tax planer with advise to sell 6/10ths of my property to avoid paying capital gain taxes. What advise can you offer to avoid paying any taxes on this property? I can bump up all the fixtures and property improvements to $300,0000 leaving about $530,000 in capital gains. My plan is to keep the Home Equity Loan (in case I need cash for my retirement) on all of the land and avoid telling the local tax appraisers we sold the property so we can keep our 1976 tax-rate plus add-on.

The tax-planner's idea appears solid, as one of the kids on this property sale, do I have anything to worry about regarding my equity and ownership rights. Would I be counted a part of a bad faith tax prep if I did not know the details in the beginning?

Attorney answers (4)

  1. David Thomson Egli

    Contributor Level 12


    Lawyers agree

    Answered . I agree with the answers of Attorney Stack and Ashouri. Certainly clarification of a number of facts needs to be made before your question can be answered fully.

    Are you planning to sell a partial interest without recording anything to show that you have done so? If a deed is recorded both the lender on your home equity loan and the county assessor are going to learn of the sale. If you don't record a deed, there are probably obligations to notify both of them of the change. Penalties can be imposed for not reporting it properly on the tax returns and for not notifying the assessor of a change of ownership. The buyer is taking a tremendous risk as to his interest in the property if nothing is recorded.

    There is nothing wrong with planning so taxes are minimized, but this may be viewed as a plan to evade taxes otherwise properly owed. It is worth the expense and time to review this with another experienced tax attorney or tax practitioner before proceeding.

    This office is licensed to practice law only in the state of California. The answer provided above is for general... more
  2. Peter G Milne


    Contributor Level 8


    Lawyers agree

    Answered . It's risky to convey property without recording the conveyance. It's risky not to inform the property tax appraisal district of the conveyance to keep a lower tax rate and to avoid paying higher taxes. What you are doing smells like a scheme to defraud the taxing authority. These observations may be off base because I don't have all the facts. I agree with the learned counsel who have responded here--seek the advice of an experienced tax attorney.

    Any statements made by Peter G. Milne in response to the question posed is not intended to be legal advice and/or... more
  3. Richard Gordon Stack

    Contributor Level 13


    Lawyers agree


    Answered . You should be careful not to rely too much on your tax planner. It has been my experience that many of our clients get into trouble with the IRS and come to us and they've received dodgy or overly aggressive advice from their tax planner or preparer. Given the stakes involved, you should invest some time in a good tax planning attorney, using the pages of this website. Good luck!

    The answer to this question does not establish an attorney-client relationship. Moreover, this attorney is... more
  4. Pardis Patrick Ashouri

    Contributor Level 17


    Lawyers agree

    Answered . Without the specifics hard to even take a guess. You already have an opinion from a tax planner to be certain consult with tax attorney to make sure that you are within the exemption guidelines. You can use avvo find a lawyer feature to locate a tax attorney in your locality.

    Good luck.

    You wouldn't want to look for general advise on a few hundred thousand dollar tax liability question better served to invest in a couple of hours of expert advise.

    In addition to AVVO's disclaimer, please note that by this answer no attorney client relationship is intended mor... more

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