Q:

Subject: Love your blog; have a question

Hi Kerry – I’ve been reading your blog this evening trying to see if you’ve already answered this question… I can’t seem to find it answered already, so here goes:

 

My partner and I are planning to get married.  Each of us owns a primary residence (I’ve owned my house about 4 years; he’s owned his house 2 years.) We’d like to sell both houses this year, and we each want to be able to take advantage of the primary residence exemption from capital gains tax.

 

The question:  can we sell the houses and get married in the same year (and still have the tax benefits on our real estate sales)?  or do we need to wait to get married until next tax year?

 

Thanks in advance!

A:

Whether you are married or not won’t make any difference. 

If you each meet the tests for your respective residences, you will each qualify for the tax free exclusion of up to $250,000 of profit, either on a joint 1040 or on two separate ones.

You can see more on this issue in the IRS’s Publication 523. 

Your own personal professional tax advisor can give you more specifics for your particular situation.

Good luck.

Kerry Kerstetter

 

Q-1:

Subject: tax-exempt partnership

 

I got some info today about the 5 Cees Compaines and a “tax-exempt

partnership” for use in real estate holdings.

I dislike anything sold as seminars. But I usually research the ideas they

pitch in their marketing.

I can’t find much info on tax-exempt partnerships and hope that you might

enlighten me. Could it be a tool for long held real estate? Could this be

used with existing partnerships? What exacty is it.

A-1:

I’m not clear on what kind of arrangement you’re referring to.

Please send me a link to the company you are working with and I will check out their info.

Kerry Kerstetter

Q-2:

I can’t find much about the company or the technique.
http://5cees.com/

Here is the ‘plan’
http://5cees.com/UsersWeb/WPP_Strategy.htm

How it works

1.        The owner establishes a family Limited Partnership with two types

of family interests.

a.    One is the general partner who has total control

b.   The other is the limited partner who has no voting rights or control.

2.     Forming a corporation that holds the general partners interest can

provide the owners “Limited Liability Benefits”.

3.      By gifting limited partners interest to a tax-exempt organization –

creates a tax-exempt partnership.

4.      The owner exchanges the property for partnership interests and

maintain 100% ownership of the general partners

5.       The owner now acquires a large income tax deduction, avoids estate

tax and grows tax-free based upon percentage gifted.

a.   When the property is sold it avoids capital gains tax and the owner

maintained 100% control to buy more property or other assets of choice.

I checked out the website and it doesn’t give me a lot of confidence of being legitimate with no names of real people.

Also, the basic premise is completely flawed.  Giving a share of a partnership to a tax exempt entity doesn’t make the entire partnership tax exempt.  Whoever came to that conclusion is completely nuts and not to be trusted.

Unless there is more to back up this plan, I would stay as far away from it as possible.

Kerry Kerstetter