How can my parents avoid paying taxes when they sell their house?

November 9, 2006

Date:  Tue, 17 Oct 2006
From:  John

I am in the process of buying my parents' house. They have a tax basis of $5,000 and the house is currently valued at $500,000. What is the best way to buy the home and avoid a tax burden for my parents?

Thanks

Answer

Date:  Thu, 02 Nov 2006

Hello John,

Assuming this is your parents' principal residence and has been their principal residence for two of the last five years, your parents should qualify for a $500,000 exclusion. See our report, "Could your residence be the ultimate tax shelter?" I suggest that you get help from an attorney or title company with the paperwork.

Good luck!
Mike Gray

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