Posted by JohnBoy on May 23, 2005 at 20:45:32:
As far as deeding each other the homes where each owns one home, yes, you can do that. But you will both remain on the mortgage on both homes.
As far as the tax issue, I’m not sure, but the way I see it is you are both just dividing up the equity you both equally own. So I don’t know why you would have to pay any tax on that.
But if you would have to pay tax on the excess equity she was to pay you in cash, I would think you could avoid that by first refinancing the home with more equity.
It appears the 2nd home would have about $45k more equity than the first home. So your share owed from the 2nd home would be $22,500.
You get the 1st home plus $22,500 and she gets the 2nd home and you both end up with equal shares of all the equity between both homes where she then owns one while you own the other,
So what if you first refinanced the 2nd home or take a second on it to get the $22,500 out. Then just deed each other a home where you both get a house and no cash exchanges hands in the process? You are merely dividing the equity you both own where you both get equal shares. I don’t understand how you could be taxed on that.
Did you live in any of the homes for two years out of the past 5 years?