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Strange real-estate venture offered to me, would you buy the property with these terms?

Ventura, CA |

In May of 2011 my parents decided to split their property into two parcels of 15 acres and in January of 2012 the first 15 acres sold. Now instead of being happy, they are mad they have to pay long-term capital gains taxes.

I quote Mom "real estate attorneys are expensive! Let's use old Eddy the tax prep man." Eddy's plan allows them to eat their cake and have it too.

Sell my brother 5 acres, me 5 acres and Dad and Mom keep 5, Presto they sold the whole property!

I have rented their primary for ten years, they plan on keeping their home equity loan on the 15 acres in case they need money?

Don't tell the county we sold the property, just the Feds. Property tax will remain at 1970 rates.

Real Estate Attorney is a must4 me!

Questions that are lurking over my shoulder are: How did they get around the fact you have to live in the house for two years to get the capital gain exemption? How can they keep the five acres they lived on in their $150k mobile home, and still tell uncle sam they sold the whole property? Why should Me and my brother allow them access to a $750k home equity loan? If we both are paying them payments of $2000 a month, why would we allow her to have this equity loan? It's like a ponzi scheme don't you think? I have a problem with them keeping a home equity loan, why should they be able to borrow against my land? We can't split the lander smaller than 15 acres, so my parents will still have $750,000 home equity loan at their finger tips. I love them but this plan does not show me and my brother love.

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Attorney answers 3

Posted

Most of the issues sound to be more directed towards tax avoidance and should be directed to a tax attorney. Sounds like someone may be trying to avoid both income tax and an increase in the County tax by not reporting the transfer; both of which have the potential to be criminal.

Another issue is with the home equity loan. All home equity loans will not allow a borrower to continue to make withdraws after they have transferred the property. All of the loans I have seen will immediately call in the loan if their is a transfer of ownership. If any withdraws are made after the transfer of ownership, there could be fraud allegations.

The more it seems wrong, the more likely it is wrong. Both You and your parents really do need an attorney. If you want to discuss the HELOC issues and its potential on any land ownership issue you have, please give me a call next week.

Kevin A. Spainhour, Esq. Spainhour Law Group www.slglawyer.com.

Asker

Posted

Thank you for taking the time to comments, my stomach is telling me this is not the best thing for my long-term interest.

Asker

Posted

If you don't call the "County" to let the know the property has been sold, how can the bank know a "transfer of ownership took place? Mother thinks by adding Me and my brother to the deed, she is taking care of these details, she is self-absorbed and not worried about the kids finances, just worried about avoiding paying the least taxes possible.

Posted

You answered your own question: "A real estate attorney is a must for me." There are far too many issues involved and competing interests, as well as potential tax and even criminal problems with the schemes proposed. There are potentially acceptable plans that can be worked out but it will take some work with a real estate attorney/tax attorney.

Posted

A former US Attorney is a must 4 you

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