Hi. I own a condo, and my father's name is also on the title and deed, because when I purchased my home 7 years ago, he was a cosigner to my initial loan. My father is no longer on my mortgage (I refinanced a year or so later), has never paid any money for the home, and he has never lived in the home. I have recently gotten married, and my husband and I sold the condo and are buying a house. My father is wondering if he is liable for any taxes on the sale of the condo even though he is not making any profit off the sale since his name is still on the title/deed. All the profit is going to my husband and I for our new home, but in the eyes of the IRS, would he owe any taxes on my profits from this sale?

Sorry to say this, but it sounds like you have made this situation worse, by not doing things properly. When your first brought the property and your father was placed on the deed, he became a part owner. You could have fixed this when you refinanced, by having him "sell" his share of the property to you. In fact, I'm surprised the lender agreed to a refinance in your name only with him on the deed. I'm also wondering how you could have sold the property without your father signing the deed over to the buyers. So you need to make sure he WAS actually on the deed.

But if he was, then he is a part owner and it will be considered by the IRS to have received his fair share of the sale.

I suggest you contact a tax professional to try and unravel this mess.

When you sell property that is co-owned, the two owners each report a portion of the sale based on their proportion of "ownership interest." The rules for determining the percentage of ownership interst varies by state law. It may be 50% for each of you if you and your father each contributed half of the initial down payment and each paid half the carrying cost. But it sounds like your father didn't contribute anything to the initial purchase nor any carrying costs - is that correct? I think in this case you can make a legitimate argument that you were the 100% owner, and thus he avoids having to report the sale. Since this was your primary residence for more than 2 years you probably qualify for the exclusion, meaning you do not need to report the sale. However, if he did contribute any of the down payment, it's a different story, as he was truly a co-owner. In this case he would have to report his share of the gain (he doesn't qualify for the exclusion), and the fact that you kept all the proceeds means he made a gift to you of his share.

From IRS Pub 523, regarding joint ownership:

Separate returns. If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. Your ownership interest is determined by state law.

Joint owners not married. If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure your own gain or loss according to your ownership interest in the home. Each of you applies the rules discussed in this publication on an individual basis.

Thanks for your input. The closing on the sale is not for another month, so sounds like I should take him off the title and deed before that happens.

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Originally Posted by laurahale30

Thanks for your input. The closing on the sale is not for another month, so sounds like I should take him off the title and deed before that happens.

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I assumed the closing had already occurred. But if it hasn't I would not take him off now. That may just maess up the title search. Have him show up at the closing and sign the deed over to the buyers along with you. Then, when he files his 2010 taxes, he can get a letter from you that since he was only a guarantor of the original mortgage and has contributed nothing towards the pruchase or maintenance of the condo, that he has no tax liability from its sale.