Keeping real estate in the family

Unless kids hold 'remainder' interest, plan will work

DEAR BENNY: My wife and I plan to sell our home to our grown children for $400,000, which would be an all-cash deal, and we would remain in the home until we die. My wife and I would then pay all expenses in running the house, such as taxes, insurance, utilities, repairs, grass cutting, etc. Would this sale structure in any way affect the up-to-$500,000 capital gains exclusion my wife and I would be eligible for in executing this sale?

When my children eventually sell this house, will they still be subject to capital gains or losses as the case may be? –Frank

DEAR FRANK: That’s an excellent question and a very good proposal. But you have to be careful how you structure the sale. If you and your wife have owned and lived in the house for at least two years out of the five years before the sale, and if you file a joint income tax return, you can exclude up to $500,000 of any profit you will make on the sale.