We want to sell an investment property-but we don't want the capital gains to appear on our income tax. Could we avoid this by deeding the property to our children and have them claim the capital gains?

Hello K:

I don't think so. Your children won't pay capital gains, because they didn't "gain". They received. Therefore, the house would be taxed to them as ordinary income. If the house is a $400,000 house, the tax burden on your children would be enormous.

Besides, I don't think the IRS would like it.

excon

PS> Certainly, you're not going to take the work of an exconvict on the internet. You should ask a CPA.

You can do a 1031 exchange and buy another property to defer the caputal gains.

Also, you and your spouse can "Gift" $11,000 each to each child each year and reduce the tax burden. You would have to"Gift" shares equal to the Gift amount. Talk to a CPA.

Also, if it is your personal residence and you have lived there for two out of the last five years, there is no capital gains tax if the capital gains is $500,000 or less. For instance, you bought the house for $100,000 and sell it for $600,000 - no capital gains tax.)

Subtract the amount that you paid for the house, along with any improvement costs from the amount you sold for. That is your Gain (The amount you OWE on the house has nothing to do with this calculation)