Can a buyer purchase a house through refinance @ $230,000 w/ a $1 deed for the seller to avoid capital gains tax on their $200,000 gain?

So here is the scoop. I m attempting to work a deal with a property seller who is in a pinch. He wants to liquidate one asset and doesn t need to make a profit for it. In fact, His biggest concern is the capital gains and he doesn t intend to 1031 exchange his way out, as he s already made $200,000 in the

So here is the scoop. I m attempting to work a deal with a property seller who is in a pinch. He wants to liquidate one asset and doesn t need to make a profit for it. In fact, His biggest concern is the capital gains and he doesn t intend to 1031 exchange his way out, as he s already made $200,000 in the refinance. The reason for selling is that he wants to free up a mortgage to refi another property.

His pinch is that he bought the 2 family for $20,000. He later refinanced for $230,000. He now wants to sell it but doesn t want to do so at a loss (I.e. Paying capital gains on the refinanced amount or the $350k he would sell it for on the market). He s given me the listing to sell it @ $350,000, but with capital gains he would still only, just break even.

My question is, if I bought this property from him with a $1 quitclaim deed and refinanced the mortgage into my name, would he still need to pay any sort of capital gains tax? And furthermore would I be required to pay capital gains from $1 if I sold the property in the future without 1031 or would my Basis cover me up to the refinanced amount of $230,000?

Please help!! I really want to by this place! Any CPAs or attorneys out there, I m
Looking for your expertise!

Other answer:

Nelly D:
"he s already made $200,000 in the refinance"?? what the heck is this supposed to mean??? you don't make money when you refinance. If he did a cash out refinance, it means the house now has a mortgage on it when it didn't before. He lost equity.

It's really unlikely that he would have any capital gains, if he has lived in it for at least 2 out of the last 5 years.
If he is single, there is the $250,000 exemption + any improvement he did, would increase the tax basis. So if the house started out $20,000 and is now worth $350,000 = it has been a long time but he's also done work during that time.
= there is a $500,000 married exemption. So the improvements are meaningless since the house is worth less than the exemption.

He's giving you the listing to sell it? Why??? You don't even understand mortgages or basic tax law related to mortgages.

efflandt:
If someone sold you a $350,000 house for $1 (significantly less than fair market value), it would be considered a gift and the "seller" would have to file gift tax Form 709. Then you would be left holding the bag for income tax when you sell it.

Nobody in their right mind is going to buy a house with a quit claim deed. That is just used to "give up" rights to something (typically to remove someone from a deed), it is no guaranty that the person writing it even has any rights to give you (they certainly do not if there is an outstanding mortgage).

If you legitimately bought it (or were gifted it) for $1, you would get a grant or warranty deed (hopefully title insurance) and there would be no mortgage to refinance. Besides with 20% down you could only finance 80 cents.

Bob:
Why would he take $1 on a $350,000 house? Capital gains on a $350,000 is $70,000-$85,000 so your story doesn't hold water
npk:
You're not going to "buy the property with a quitclaim deed" unless he retires his mortgage loan first. And accepting a quitclaim deed would be foolish on your part.
Rob:
Absolutely illegal here.
Both will get tax bills
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