[an error occurred while processing this directive] [an error occurred while processing this directive][an error occurred while processing this directive] September  2002   [an error occurred while processing this directive] [an error occurred while processing this directive]   Married Filing Separately vs. Jointly
  Renting, Then Selling a Residence
  Income from a Q-TIP Trust
  Sale of a Multiple Ownership Residence
[an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] Please clarify the difference in federal taxes when two unmarried people file separately vs. married and filing jointly. Is there still a marriage penalty? [an error occurred while processing this directive] The marriage penalty is al*ive and well. You have to run the numbers for both filing jointly and married filing separately to determine the tax differences. In almost all cases, married filing jointly yields a lower tax. [an error occurred while processing this directive] See IRS Website Publication 17 [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] If I rent out my residence for several years and then sell it, will the entire appreciation be taxable? [an error occurred while processing this directive] Check out the rules for the residency exclusion ( my tax class, real estate, residence ). If you qualify for the residence exclusion, then you must sell your condo within 3 years from the time you move out; otherwise, the condo becomes a rental and the sale will produce gain or loss. Once the condo becomes investment property, you could use the tax-free exchange rules under IRC Sec. 1031 to avoid taxation by exchanging your condo for other real estate held as an investment. Check out my articles on tax-free exchanges under tax class, real estate. [an error occurred while processing this directive] The Tax Prophet's articles on Real Estate Taxation [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] Is an income distribution from a Q-Tip trust (A “qualified terminal interest trust” where a surviving spouse is entitled to the income for the rest of their life) taxable? If so, how is it taxed? [an error occurred while processing this directive] A Q-TIP trust is a special trust for the benefit of a surviving spouse. The decedent spouse’s estate receives a marital deduction (which reduces the size of the decedent’s estate for estate-tax purposes, dollar-for-dollar) for the amount placed in the Q-TIP trust. Upon the death of the surviving spouse, estate tax is paid by the trust on the trust principal amount and then the trust distributes according to the directives of the decedent spouse. A Q-TIP Trust requires that income from the trust assets be paid to the spouse at least annually. The income flows through to the spouse and is taxed to her. If the income is tax-exempt, such as income from municipal bonds, then she will owe no tax. [an error occurred while processing this directive] The Tax Prophet's articles on Estate Planning [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] Seven years ago my girlfriend and her mother bought a co-op in NYC for my girlfriend and me to live in there. Mother and daughter are Joint Tenants in the share-hold. My girlfriend and I married and now want to sell the property and buy a multifamily residence. The sale will net approximately $250,000.

(a) Will my mother-in-law pay capital gains tax on her share of the gain?

(b) The multifamily home will community property - will my mother-in-law be subject to gift taxes by using the sale proceeds for the new purchase?

(c) May we retain the entire proceeds for our new home purchase?

[an error occurred while processing this directive] You need to look to New York state law regarding the nature of your joint tenancy. Under California law, mother and daughter would each own 50%. Upon sale of the property, daughter could exclude gain under the residency exclusion, but mother will have a capital gain (unless the property is considered her residence as well). The rollover rules for a principal residence have been replaced by the residency exclusion. If mother transfers title to daughter, she will be making a gift (however, a gift of an undivided interest in real property may be discounted - an advantage to the donor). If mother receives the proceeds and then makes a gift, she'll have a gift tax as well (however, she cannot discount cash). See my articles regarding gifts and minority discounting. [an error occurred while processing this directive] The Tax Prophet's articles on Real Estate Taxation[an error occurred while processing this directive][an error occurred while processing this directive][an error occurred while processing this directive]