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Old 12-15-2015, 01:05 AM   #41
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Originally Posted by pb4uski View Post
TP, it seems like the OP can get in enough tax trouble on his own.... he doesn't need any help from you.

Seriously though, that sounds like a high risk strategy. With no documentation what the OP and his tenant did for past tax returns would be more indicative of what the deal was.
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Originally Posted by RunningBum View Post
I can't see any way in which that's a better solution.

The transaction didn't actually take place at any point, so I don't see how the IRS would accept that. Post dating documents would be fraud.

If you could make it happen, then what? The friend now owns the house, and the OP owns a mortgage which she is no longer paying? So now he has to go through a legal repossession? What if she decides to keep it and keep paying or refinances and buys him off? How much does she owe him, since there was no agreement on a purchase price?

A verbal contract is still a contract....

As I said, it was contingent on what was agreed too.... not doing it after the fact...

My dad sold a number of houses by contract... most people stopped paying.... you do not have to repo the house as the title never changed hands... dad always owned the house...
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Old 12-15-2015, 05:15 AM   #42
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Originally Posted by outabout View Post
I sold a rental property in 2014, and had to recapture depreciation allowed or allowable.

There is a way to retroactively claim previous unclaimed depreciation by using form 3115 Change in Accounting Method, this allows you to do all previous years in one form, and you don't have to deal with amended returns which would only go back 3 years. In this form, you would select change from "impermissible (not taking depreciation) method" to "permissible method (taking appropriate depreciation)". Some CPAs don't even know about this method, so you need a good one.

I am quite certain this can be used BEFORE you sold the property, but it is possible it can be used AFTER as well as long as you owned the property in the tax year you file 3115. You need to ask your CPA
See Publication 946 - How to Depreciate Property - How Do You Correct Depreciation Deductions? for the hoary details and why a CPA may be useful.
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Old 12-15-2015, 07:49 AM   #43
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.... My dad sold a number of houses by contract... most people stopped paying.... you do not have to repo the house as the title never changed hands... dad always owned the house...
If title never changed and your dad always owned the house then how can you say that he "sold" the house? Did any of these arrangements ultimately result in change of title? If so, how did the sale work for tax purposes?

My dad did a number of installment sales of real estate but they were a true sale where title changed and he provided seller-financing and it spread the capital gain out over a number of years. He received every payment in all cases.
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Old 12-15-2015, 08:22 AM   #44
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Ok, saw the CPA got the answers I need and they will be filing my taxes this year to handle the situation. Provided all of the documentation and the CPA will be handling it. I will be paying the depreciation. I explained everything surrounding the house, only owned 13 years and not 35, and the CPA gave me all of the information I need.

Once the CPA had all of the information surrounding the house and the person living in it she gave me some great advise. Thanks to all that took the time to get involved with my question. I told her that I would pay whatever monies I needed to pay to not have the IRS breathing down my back. I don't want to be charged with fraud, if I made a mistake that I would take full accountability.
So what were the answers and advice? Since you asked for help here it only seems fair that you share the result.
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Old 12-15-2015, 08:24 AM   #45
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Old 12-15-2015, 08:25 AM   #46
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A verbal contract is still a contract....
One of the first things I was taught in Real Estate school was that in California, at least, verbal contracts are invalid in real estate transactions.
The bottom line is that the OP is best served , as a number of people have said, is going to a CPA with Real Estate expertise..
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Old 12-15-2015, 08:27 AM   #47
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One of the first things I was taught in Real Estate school was that in California, at least, verbal contracts are invalid in real estate transactions......
Yes, now that you mention it, that is my memory as well when I took real estate law in college and sat for the real estate agent exam.
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Old 12-15-2015, 11:17 AM   #48
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If title never changed and your dad always owned the house then how can you say that he "sold" the house? Did any of these arrangements ultimately result in change of title? If so, how did the sale work for tax purposes?

My dad did a number of installment sales of real estate but they were a true sale where title changed and he provided seller-financing and it spread the capital gain out over a number of years. He received every payment in all cases.
I actually do not know what he put down on his tax return for the sale.... I do know he put down the interest income....

Yes, one house did pay off fully... the guy paid for 20 years... after the last payment Dad signed over title to the buyer.... now, I wish this had not happened because it was a BIG house in the Heights that is probably worth well north of $1 mill.... maybe even $2 mill..... back in the 60s you could buy houses there for $15K to $30K... and he rented them out by the week... he was a slum lord for a few years....
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Old 12-15-2015, 11:20 AM   #49
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Originally Posted by Souschef View Post
One of the first things I was taught in Real Estate school was that in California, at least, verbal contracts are invalid in real estate transactions.
The bottom line is that the OP is best served , as a number of people have said, is going to a CPA with Real Estate expertise..
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Yes, now that you mention it, that is my memory as well when I took real estate law in college and sat for the real estate agent exam.

Just to add... my dad had written contracts, so no problem there....

But, from what I understand, a verbal contract is valid even with real estate if both agree on the terms... I could be wrong as I am not a lawyer or a RE agent....


Edit... looked it up... third link I looked at...

Oral Contracts

In most instances, oral contracts are legal. However, these agreements can be difficult, if not impossible, for a court to enforce. Without a signed, written contract, the court is asked to make a decision without evidence of the parties' agreement. Oral contracts are not illegal, because if both parties keep their "word," the transaction will work well. If the parties to an oral real estate contract keep their promises, a dispute will never reach the court.




http://homeguides.sfgate.com/real-es...ing-58144.html
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Old 12-15-2015, 11:27 AM   #50
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So what were the answers and advice? Since you asked for help here it only seems fair that you share the result.
+2. I have a sort of but not quite similar situation, and would be interested in what you learned.
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Old 12-15-2015, 12:30 PM   #51
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...But, from what I understand, a verbal contract is valid even with real estate if both agree on the terms... ...
Like any other form of agreement, if the parties agree then there is no need for a written contract.

The nuance of the difference is while verbal contracts are generally enforceable, they are not enforceable for real estate. So where Souschef said invalid and I agreed with him, we really meant unenforceable.

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Real estate contracts must always be in writing in order to be enforceable. While it's not illegal to have an oral contract, courts historically will not enforce non-written real estate contracts.
Also:

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A contract can be oral, can be written, and can even be implied by the conduct of the parties. However, certain contracts are governed by a concept in the law known as the Statue of Frauds. The Statute of Frauds is not actually one particular statute, but rather a collection of statutes that require certain types of contracts to be in writing.

The Statute of Frauds exists to try and strike a balance between people that believe in the old adage a man is only as good as his word, and those individuals that are concerned about meritless claims or false assertions brought by unscrupulous individuals. To try and create this balance, there are various statutes that spell out certain types of contracts that must be in writing to be enforceable.

Some of the more common contracts that must typically be in writing to be enforceable by business attorneys include certain contracts for the purchase or sale of real estate....
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Old 12-15-2015, 01:50 PM   #52
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I agree that the contract would not be enforceable if verbal... but it still would stand up as a contract for tax purposes...

I had asked what was the understanding of the two parties when the deal was struck... OP said he was planning on 'giving' the property away after 35 years... I just wanted to know if this was only in his head or the other person 'knew' this was going to happen...

It does not matter know as OP has consulted a professional and it happy with the course they are pursuing.... at least that is what I infer from the posts...
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