We bought a foreclosure two years ago that has been our primary residence and are now looking to sell it. My question relates to capital gains under the following situation:
- My mother bought the house for us using an equity line on her primary residence (We used her to buy the house so we could act quickly and not have to go through the process of conventional financing if "we" were the purchaser).
- We've lived in the house for the past two years but have not been the owner. Hence, it's still in my moms name.
- We are now selling the property at a significant gain.
- We'd planned on her quit claiming the property to us so we can avoid the capital gains tax as it's our primary residence.
I'm now learning we need to have "owned" and lived in the home for at least two years to avoid capital gains. The issue we have is we've lived in the home, but not owned it. We will have only "owned" it for a few months.
Does this put us in a situation we now need to pay capital gains? If so, can we back date the purchase to when we moved in to qualify for two years of ownership?
Any other suggestions/thoughts to help us avoid any tax issues?
Note...my wife and I are self employed so we show very little income and are in the lowest tax bracket.