This person bought a condo in 2006. His son co-signed on the mortgage, and both them began to live in it until the son got married and moved out in 2011. In 2019 the condo was sold, and the 1099S is in the son's name with his social security number, so my question is as follows:=====>>>I am not pretty sure what the present situation is;whether the father bought it and his son cosgned on the mort. ?? or whether his son bought lt and the father cosigned the mort.for his son?? Sometimes, it happens even if a Co-signer never has true interest in home, but. receives 1099S after sale.
However, It all depends on how they decide to hold title on the condo.; asfar as I know, even though lender rules vary based on loan type and down payment, in general, lenders require that anyone on the loan must also be on the title to the home(I guess they must check this), so his son, the co-signer, will also be considered an owner of the home. If the borrowers take title as joint tenants, they will each have equal ownership shares to the property. If they take title as tenants in common, then, they can define their individual ownership shares to the property.
In generl, for tax purposes, capital gains are reported on the tax return of the beneficial owner of the condo , I mean. the person who has legal ownership and enjoyment of the property as well as the legal title. Resulting income taxes, therefore, are paid by that beneficial owner.so even when two people are on a condo title, beneficial owner pays capital gains
1.Since the 1099 S is in his son's name, is he liable for the entire sale?======>>yes, I think so aslongas he is a beneficial owner. as said previously, aslongas his son is , as a beneficial owner, still on the title ,as a joint owner, when the condo is sold, then, the default assumption will be that half the capital gains belongs to hisson and he owes CG tax.
2. If he is liable for the entire sale, then he will have to pay capital gains on the entire net since the 5 of the 2 yrs does not apply, am I correct?===>>>>correct, just partial CG exemption. I assume that the cono is his first home, then, he can treat part of the CG profit as tax-free even if he doesn't pass the 2-out-of-5years tests. A reduced exclusion is available if he sell the condo before passing those tests because of a,;change of health, or ect.
3.>>> Should he get the 1099 S changed to his father's name since he was the actual owner of the condo and not his son? By the way the father was still living in the condo when it was sold.======>>>>>as said, unless he is a beneficial owner, then he is not liable for the CG tax since he is not a beneficial owner but his father. In this case, hisfatheris required to report the sale on his tax return since he was the owner of the house. If the Form 1099S reported the entire sale proceeds on both of the forms they each received there should be a correction from the company that issued them.
If each of them show half the sale proceeds on each of their Forms 1099S, he can nominee his portion to him to eliminate IRS questions later. There is nothing to report on his tax return
4.If they decided to treat the sale as 50% ownership to each other, then I would assume that the father can take the exclusion but the son would not be able to take his exclusion too since he was not living there in last five years before the sale, am I correct?=====>>correct.