Smitty77_7 Posted May 1, 2018 Report Share Posted May 1, 2018 I've posted a thread on IRV2, with more info then I'll put here. http://www.irv2.com/forums/f92/reverse-state-domicile-to-residency-considerations-389615.html I'll post an abbreviated post here too please. I do see a few Escapee Forum members posting on IRV2 too, but suspect their are some that do not. When my wife and I started our journey to retirement, this forum was instrumental in providing advice and suggestions and 'What if's?' input to us as we both prepped for, and then transitioned into, retirement. So, wanted to tap this braintrust for input again. Current -We're SD Domiciled now since 2012. We retain two homes in California. 1) Our former residency home, is now our vacation home. The second, we transitioned over to a Rental Property. We've filed 540NR's on the Rental Property, and retained the Vacation Home to provide a place for my wife's Mom (I call her Mom too:)!), to have a safe place to live at no cost. -My DW has become stressed by us retain the Rental Propety. We manage it remotely the bulk of the year as we travel. Great tenant, now for 6 years, so that thank goodness has been a positive. But DW being stressed, is not a good thing. So we're thinking of selling the Rental Property. -A good problem to have, is high Cap Gains. So much so, that even with the 2 out of 5 $500K exemption, we'd still pay a lot in Cap Gains, remaining bumped up to the 20% Cap Gain level for that yer. -So doing the math, subtracting out the costs of becoming California Residents again for say 2 1/2 years to gain the 2 out of 5 $500K exemption, it sill pencils out worth the PITA to do so. Coach registration remaining in SD is my question. We'd both have California DL's again after we change back to California Residents. But the Coach and Toad would remain out of California for the 7, 8, 9 months a year we'll still be traveling. Opinions on leaving them both, or perhaps just the Coach, registered in SD? If needed, we could leave the coach in Yuma, 3-5 months (Usually in 4-6 week timeframes.) we'd be back in California. Any opinions or thoughts on this would be appreciated. TIA, and best to all, Smitty (Note: Mentioned in the IRV2 forum too, that I do have an appointment next week to review my worksheets with a Real Estate Attorney who is also a CPA. So will be getting finite input on the taxes portions of this. In a quick call, she said she had no experience or opinion on vehicle registration strategies:)!) Be safe, have fun, Smitty 04 CC Allure "RooII" - Our "E" ride for life! Link to comment Share on other sites More sharing options...
Twotoes Posted May 1, 2018 Report Share Posted May 1, 2018 I am a former CA resident also. I have 3 rental properties still in CA. One was my former primary residence. I file a CA non resident return on the rental income. I have a property manager who manages all 3. I am also looking at liquidating 1 or all 3 properties soon. Yes the capital gains are a killer. I am looking at property in other states and doing a 1031 tax free exchange to avoid the taxes. If you don’t need the money from the sale you may look into a tax free exchange. I highly recommended you speak to your accountant and a tax lawyer. I also highly recommended you have a property manager. I pay 9% of the rental income to the management company. 2015 Itasca Ellipse 42QD 2017 Jeep Wrangler Unlimited Rubicon Hard Rock Edition 2021 Harley Street Glide Special Fulltimer Link to comment Share on other sites More sharing options...
Kirk W Posted May 2, 2018 Report Share Posted May 2, 2018 22 hours ago, Smitty77_7 said: Coach registration remaining in SD is my question. We'd both have California DL's again after we change back to California Residents. But the Coach and Toad would remain out of California for the 7, 8, 9 months a year we'll still be traveling. Opinions on leaving them both, or perhaps just the Coach, registered in SD? That would be pretty risky if you were to park it near your home for long enough to get noticed. CA is not only aggressive on enforcement of their laws regarding vehicle registrations, but I do believe that they continue to have a reward program for those who report such violations. If caught, it could well be considered to be tax evasion and fines would be applied. You could also be taking a risk on the return of domicile if you do not make sure that you do everything the laws require. Since revenue is the key reason for enforcement, in all likelihood the revenue gained by not accepting you as residing in the house would probably be greater than that gained from taxes on the RV. What you are proposing to do is something that would probably be best to get advice from a CA licensed attorney. It is very easy for us to give advice because being wrong costs us nothing but our bad advice could cost you a great deal. Good travelin !...............KirkFull-time 11+ years...... Now seasonal travelers.Kirk & Pam's Great RV Adventure Link to comment Share on other sites More sharing options...
Smitty77_7 Posted May 2, 2018 Author Report Share Posted May 2, 2018 Thanks Twotoes:)! Looked into 1031's and semi related 721's. But our goal is to 'cash out' now, and of course minimize the tax hit as much as possible... And thanks Kirk, No question we need to do the legal thing, and we will. That being said, California has had no problem accepting our DMV fees on our Ford F150 that we keep at our Vacation Home, while being Domiciled in South Dakota. So it should not be illegal for us to have vehicles registered in other states then California? The devil of course is in the details. Because we travel outside the state of California the majority of the year, and will continue to do so, is the main reason I'm even exploring retaining SD registrations. I have not yet read the State of California DMV regulations on this, will try to do so before I consult with the Attorney (Being Real Estate focused, not sure if she'll have an opinion on this or not:)!). Appreciate both of your comments, best to you both and all, Smitty Be safe, have fun, Smitty 04 CC Allure "RooII" - Our "E" ride for life! Link to comment Share on other sites More sharing options...
sandsys Posted May 2, 2018 Report Share Posted May 2, 2018 One of the things you do being domiciled in South Dakota is sign a statement something like this being where I plan to return when I settle down. That's what allows you to license your RV in South Dakota. Since you plan to move back to California for at least two years, I don't see how you can keep the license in SD. Plus, I don't see California letting you live there for two years while domiciling in SD, especially since your reason for moving back is to save on money CA wants. But, I'm not a lawyer so there may be a loophole I'm missing. Linda Sand Blog: http://sandcastle.sandsys.org/ Former Rigs: Liesure Travel van, Winnebago View 24H, Winnebago Journey 34Y, Sportsmobile Sprinter conversion van Link to comment Share on other sites More sharing options...
Chad Heiser Posted May 2, 2018 Report Share Posted May 2, 2018 Here are the applicable Vehicle Code sections in California (I added a couple of underlines in VC 6700 that are applicable). VC§ 4000.4. Registration Required: Primary Use (a) Except as provided in Sections 6700, 6702, and 6703, any vehicle which is registered to a nonresident owner, and which is based in California or primarily used on California highways, shall be registered in California. (b) For purposes of this section, a vehicle is deemed to be primarily or regularly used on the highways of this state if the vehicle is located or operated in this state for a greater amount of time than it is located or operated in any other individual state during the registration period in question. VC§ 6700. Use of Foreign License Plates: Limitation (a) Except as provided in Section 6700.2, the owner of any vehicle of a type otherwise subject to registration under this code, other than a commercial vehicle registered in a foreign jurisdiction, may operate the vehicle in this state until gainful employment is accepted in this state or until residency is established in this state, whichever occurs first, if the vehicle displays valid license plates and has a valid registration issued to the owner, and the owner was a resident of that state at the time of issuance. Application to register the vehicle shall be made within 20 days after gainful employment is accepted in this state or residency is established in this state. (b) A nonresident owner of a vehicle, otherwise exempt from registration pursuant to this section or Section 6700.2, may operate or permit operation of the vehicle in this state without registering the vehicle in this state if the vehicle is registered in the place of residence of the owner and displays upon it valid license plates issued by that place. This exemption does not apply if the nonresident owner rents, leases, lends, or otherwise furnishes the vehicle to a California resident for regular use on the highways of this state, as defined in subdivision (b) of Section 4000.4. (c) Any resident who operates upon a highway of this state a vehicle owned by a nonresident who furnished the vehicle to the resident operator for his or her regular use within this state, as defined in subdivision (b) of Section 4000.4, shall cause the vehicle to be registered in California within 20 days after its first operation within this state by the resident. VC§ 6700.2. Exemption for Nonresident Daily Commuters (a) Notwithstanding Section 4000.4, subdivision (a) of Section 6700, or Section 6702, a nonresident daily commuter may operate a motor vehicle on the highways of this state only if all of the following conditions are met: (1) The motor vehicle is a passenger vehicle or a commercial vehicle of less than 8,001 pounds unladen weight with not more than two axles of the type commonly referred to as a pickup truck. (2) The motor vehicle is used regularly to transport passengers on the highways of this state principally between, and to and from, the place of residence in a contiguous state and the place of employment in this state by the owner of the motor vehicle and for no other business purpose. (3) The motor vehicle is not used in the course of a business within this state, including the transportation of property other than incidental personal property between, and to or from, the place of residence in a contiguous state and the place of employment of the motor vehicle owner in this state. (4) Nothing in paragraphs (2) and (3) prohibits a nonresident daily commuter operating a motor vehicle that displays currently valid external vehicle identification indicia and who possess a corresponding identification card issued pursuant to Section 6700.25 from using that vehicle for other lawful purposes. (b) The exception to registration of a motor vehicle under the conditions specified in this section does not supersede any other exception to registration under other conditions provided by law. (c) This section does not apply to a resident of a foreign country. Basically if you are a California resident and you drive your vehicle in CA you are required to register it in CA. If you don't bring your RV into CA, you could get away with not registering it here (you may have issues finding a place where you could register it though). Your Toad, on the other hand (assuming you use it in CA) would have to be registered in CA. 2009 Volvo 670 with dinette/workstation sleeper - Walter 2017 DRV Mobile Suite 40KSSB4 with factory mods, dealer mods and personal mods - now in the RV graveyard 2022 DRV Full House MX450 with customized floor plan 2018 Polaris RZR Turbo S (fits in the garage) 2016 Smart Car (fits in the garage or gets flat towed behind the DRV when the RZR is in the garage) My First Solar Install Thread My Second Solar Install Thread & Photos and Documents Related to the build My MX450's solar, battery and inverter system - my biggest system yet! chadheiser.com West Coast HDT Rally Website Link to comment Share on other sites More sharing options...
Kirk W Posted May 3, 2018 Report Share Posted May 3, 2018 9 hours ago, Smitty77_7 said: Because we travel outside the state of California the majority of the year, and will continue to do so, is the main reason I'm even exploring retaining SD registrations. It isn't the registration that I'd be most concerned about but that CA may say that you never did make that house your primary residence and domicile again. Thus they could state that you failed to meet "the 2 out of 5 $500K exemption," and so do not get to claim it. Good travelin !...............KirkFull-time 11+ years...... Now seasonal travelers.Kirk & Pam's Great RV Adventure Link to comment Share on other sites More sharing options...
Smitty77_7 Posted May 3, 2018 Author Report Share Posted May 3, 2018 All the feedback has been great, and much appreciated. When in doubt, we'll document what we're doing, and most likely do the path of least questions on what we're doing. I will also share that if we'd known the DW would become uncomfortable with remote property management - we'd had settled things while the '2 out of 5' time was still in place. Things change for all of us, and I support my DW completely. The reality is if she is uncomfortable, or stressed - it's time to do something to resolve that:)! Of course maximizing our walkaway funds is important. And as American's, is it not our job also to sip on a cup of Boston salt water tasting tea, and reduce our taxes as much as possible? Yep, we're patriots... We'll figure out the best course for us ahead. And welcome more input... Best, Smitty Be safe, have fun, Smitty 04 CC Allure "RooII" - Our "E" ride for life! Link to comment Share on other sites More sharing options...
Kirk W Posted May 3, 2018 Report Share Posted May 3, 2018 7 hours ago, Smitty77_7 said: The reality is if she is uncomfortable, or stressed - it's time to do something to resolve that:)! Absolutely! It takes two of you to make a happy lifestyle. Some things are just not worth even a large amount of money. I have been married to Pam now for 55+ years and our lives are so intertwined that I could never be happy if she isn't. You are taking the wise approach. ☺️ Good travelin !...............KirkFull-time 11+ years...... Now seasonal travelers.Kirk & Pam's Great RV Adventure Link to comment Share on other sites More sharing options...
Hugh Currin Posted May 3, 2018 Report Share Posted May 3, 2018 Smitty: Have you considered selling the house and carrying the loan yourself? That would spread the capitol gains out over a number of years. Hugh Link to comment Share on other sites More sharing options...
Twotoes Posted May 3, 2018 Report Share Posted May 3, 2018 18 hours ago, Kirk Wood said: It isn't the registration that I'd be most concerned about but that CA may say that you never did make that house your primary residence and domicile again. Thus they could state that you failed to meet "the 2 out of 5 $500K exemption," and so do not get to claim it. The 2 year out of 5 is a Federal Law for your Federal Capital Gains taxes. It is not CA law. The exemption is only $250,000 per person. If you file a joint return each souse can claim the $250,000 for a total of $500,000. Also be aware that this is a one time exemption and can not be used again on another property. If your spouse dies and you remarry you will not be elegable for the exemption again with your new spouse. 2015 Itasca Ellipse 42QD 2017 Jeep Wrangler Unlimited Rubicon Hard Rock Edition 2021 Harley Street Glide Special Fulltimer Link to comment Share on other sites More sharing options...
sandsys Posted May 3, 2018 Report Share Posted May 3, 2018 1 hour ago, Twotoes said: Also be aware that this is a one time exemption and can not be used again on another property. Good point. If you think your Mom is going to need you to move back in with her some day it might be best to pay the gains on this one to have that potential savings when it comes time to sell the house Mom now lives in. Do you run the rental as a business? Are their other implications of that? Linda Blog: http://sandcastle.sandsys.org/ Former Rigs: Liesure Travel van, Winnebago View 24H, Winnebago Journey 34Y, Sportsmobile Sprinter conversion van Link to comment Share on other sites More sharing options...
Smitty77_7 Posted May 4, 2018 Author Report Share Posted May 4, 2018 My understanding, and will need to fact check this:)! Is that we can use the exclusion only 'once every two years'. So if we were to say sell the Vacation home two years after becoming California residents. Change our Primary over to the current Rental home - we'd then need to wait at least two more years before we'd be able to use the exclusion again. And the point about the SD DMV and registration. I'll need also go back and re-read some of the links I saved when comparing SD, FL and TX as our Domicile state. But I believe that SD' Attorney General determined sometime in the mid 90's, that as long as we provide the Current State of Residency Address - that their was nothing in their states regulations to keep us from being able to also 'Register a Vehicle in SD'(?). (This was 6-7 years ago, and my memory may have that conveniently 'remembered' the way I'd like to have it work:)! So for sure, not going saying it is accurate.) And regardless, it is a valid point that some states are more 'concerned/aggressive' about these sort of things then others. California is one of them. As more info sharing. As we started our planning to evolve into retirement, and full timing. Our 'intent' was to have left California completely. That changed when my MIL had a combination of sever medical problems, as well as the bulk of her monthly income was also lost - when we had her very low functioning Down Syndrome move into a Group Home. (Her Husband's Military Pension benefits was left to her son. As a Special Needs individual, he retained 100% of his retirement. Whereas she as a serving window, would have received 50%.. When he moved into the Group Home, the State of California receive 100% of his income. Until a few years ago, when finally Congress passed a bill that allowed Military Special Needs individuals, to also have a Special Needs Trust established for them. Which we have now accomplished. But either way, Mom/MIL no longer has full access of these funds to live with.) I share all that, because my wife and I did truly 'intend' to leave California. And at the time we were doing all of this, we thought a home in either Spearfish, or possibly closer to Rapid City/Black Hills would be a great place to have as residence. With a winter home probably in either Congress, or perhaps back in California at Jojoba COOP's. Nope. Nothing firm, but sure what we were thinking. But 'Life Happen's', ours and our families - and like many before us, we've adapted our plans to facilitate others:)! We're not trying to pull any fast one's here. But now that the 2 out of 5 has expired. We see nothing wrong legally, or ethically, with altering our plans to minimize the tax hit. I still jokingly claim that it is our American Duty, to pay our taxes - but, to pay as little as legally possible. (Other's may see this as wanting to have our cake an eat it too - but, we see it as doing the right thing for us and our family.) We will get legal guidance on this, and we will be legal in what we end up doing. And one last comment about carrying the first to spread out the tax hit. We're going to need to 'cash out', in order to financially cover Mom/MIL's rental expenses going forward (And she will not leave her Down Syndrome son, whom we get on Saturdays to come spend the day with her:)!). As well as we're looking into replacement longer term home for my wife and I to come off the road. Reno, Prescott, Spearfish, Tucson, Lead, Sioux Falls - whatever it ends up being, or combos of being, we'd like to lock in a future place while Mortgage Rates remain low. Sharing lots here, but frankly many of the members of this forum have helped us determine our path into regiment when we started our research 10-12 years ago. And, having an 'Exit Strategy' was something that I added to our 'Planning To Do List' back at that time. Now, what we thought then - has changed. And that's OK:)! So if others read this thread in the future, I probably share more then I should. (Boring to some I'm sure. But, I read many great threads that helped us, by those who shared quite a bit - so paying it forward some.) And the key, as sent to me in a PM by a former Escapee who is no longer with us - is to always fact check what is read in forums!!! So, will send that tip forward too:)! Best to you all, and thanks again for the thoughts and cautions. And sorry for being long winded:)! Smitty Be safe, have fun, Smitty 04 CC Allure "RooII" - Our "E" ride for life! Link to comment Share on other sites More sharing options...
sandsys Posted May 4, 2018 Report Share Posted May 4, 2018 Smitty, Having the back story helps us understand where you are coming from which, in turn, helps us understand what you need to do. Thanks for telling us. Linda Sand Blog: http://sandcastle.sandsys.org/ Former Rigs: Liesure Travel van, Winnebago View 24H, Winnebago Journey 34Y, Sportsmobile Sprinter conversion van Link to comment Share on other sites More sharing options...
Kirk W Posted May 4, 2018 Report Share Posted May 4, 2018 8 hours ago, Smitty77_7 said: We're not trying to pull any fast one's here. But now that the 2 out of 5 has expired. We see nothing wrong legally, or ethically, with altering our plans to minimize the tax hit. I still jokingly claim that it is our American Duty, to pay our taxes - but, to pay as little as legally possible. (Other's may see this as wanting to have our cake an eat it too - but, we see it as doing the right thing for us and our family.) We will get legal guidance on this, and we will be legal in what we end up doing. Because of the financial issues you have and the amount of money involved, I definitely would get professional advice. I agree with you that there is nothing wrong with taking the best course for tax purposes that the law allows. While I would not knowingly cheat I do not see anything wrong with taking advantage of all that is legal. In your case, the risk of making a mistake is enough money to probably justify the cost of an attorney, even though they are expensive. As much as I dislike paying the rates that they charge, this seems to be a situation warranting the cost to maximize your savings. Please stay active on these forums and keep us posted as to the course you take as we can all learn from the experiences that you share. Good travelin !...............KirkFull-time 11+ years...... Now seasonal travelers.Kirk & Pam's Great RV Adventure Link to comment Share on other sites More sharing options...
Twotoes Posted May 4, 2018 Report Share Posted May 4, 2018 My understanding, and will need to fact check this:)! Is that we can use the exclusion only 'once every two years'. So if we were to say sell the Vacation home two years after becoming California residents. Change our Primary over to the current Rental home - we'd then need to wait at least two more years before we'd be able to use the exclusion again. Incorrect. It is a one time exclusion. You are only eligible on one property for life. The 2 year rule is that in order for the property to be considered your primary residence you must have lived in the property 2 years out of the last 5. The exclusion is only for a personal residence and not rental property which is always subjected to capital gains tax. 2015 Itasca Ellipse 42QD 2017 Jeep Wrangler Unlimited Rubicon Hard Rock Edition 2021 Harley Street Glide Special Fulltimer Link to comment Share on other sites More sharing options...
Smitty77_7 Posted May 6, 2018 Author Report Share Posted May 6, 2018 On 5/4/2018 at 9:04 AM, Twotoes said: My understanding, and will need to fact check this:)! Is that we can use the exclusion only 'once every two years'. So if we were to say sell the Vacation home two years after becoming California residents. Change our Primary over to the current Rental home - we'd then need to wait at least two more years before we'd be able to use the exclusion again. Incorrect. It is a one time exclusion. You are only eligible on one property for life. The 2 year rule is that in order for the property to be considered your primary residence you must have lived in the property 2 years out of the last 5. The exclusion is only for a personal residence and not rental property which is always subjected to capital gains tax. Thanks for your prompt feedback. I was also researching the California Prop 13 property tax base transfer rules, which is also a onetime thing. As well as possible 1031's/721's - may have confused the converting of a 1031 acquired home, into a Primary Resident, timeline (And other 'gotcha's too'.). And we all know the danger of reading the Internet, as I'm pretty positive I read (Which seems to have been not correct!) - that the '2 out of 5' was not limited to a onetime occurrence. Appreciate your input, and will spend more time reading the fascinating (Though at times very poor story line!) of the IRS Regulations:)! Best to you, and all, Smitty Be safe, have fun, Smitty 04 CC Allure "RooII" - Our "E" ride for life! Link to comment Share on other sites More sharing options...
Kirk W Posted May 6, 2018 Report Share Posted May 6, 2018 7 hours ago, Smitty77_7 said: Appreciate your input, and will spend more time reading It could be very helpful to many here if you will keep us informed about what you learn and also what you ultimately choose to do. A report about how things work out will also be appreciated since it is a question that is sure to come up again in the future. You are wise to study things first. Thank you for sharing. 🙂 Good travelin !...............KirkFull-time 11+ years...... Now seasonal travelers.Kirk & Pam's Great RV Adventure Link to comment Share on other sites More sharing options...
Smitty77_7 Posted May 6, 2018 Author Report Share Posted May 6, 2018 I went back thru some of the links I had saved while researching, some cut & pastes from the article (From a law firm). Of course it could be wrong. But I also read parts of the IRS publication on this too. One item I'm asking the Real Estate Attorney/CPA to help me quality, is the final quote below. Considering having the DW become California Resident, while I remain SD. We'd still file Jointly Federal. State of California filing is where my mind gets severe cramps from strain:)! Assume my DW would file normal California 540, but only on her income draw from retirement, which due to the bulk of hers being out of a Rollover Roth IRA, is non taxable from the Federal perspective. This is another reason we're considering carrying the costs of the Rental Property, and not charge our Daughter anymore rent. Because I get confused on how that would work with us being joint owners, but only the DW required to file California 540's. Today we file a joint 540 NR (Non Resident) for the rental income. Not clear if we were to continue charging her rent, if it could all be filed under the DW's normal California 540, or if I'd still need to file a 540NR as going owner. Hoping the CPA will have a good answer to this one:)! The benefit of me remaining SD, and the DW coming back to becoming a California Resident, is that that makes keeping the RV and Toad registered in SD much easier. If we were driving in California, and I do the bulk of the RV driving, my DL's and RV/Toad plates would all match. And, no need to go take the Class B Non Commercial tests that California had me do before leaving the state in 2012:)! But would only do this, if the CPA confirms that we'd still be able to get the total $500K exemption, not just $250K for the DW being a Resident. Assume since it's a Federal exemption, that it should not matter if I'm a SD. And yeah, this would be interesting to have each of us as a different States Resident/Domicile:)! (AND NOT SAYING WE'LL DO THIS - JUST PART OF THE ONGOING 'What If?' research:)!) Fun, fun, NOT FUN - best to all, Smitty Here are some excerpts about '2 out of 5': "If you qualify for the exclusion, you may do anything you want with the tax-free proceeds from the sale. You are not required to reinvest the money in another house. But, if you do buy another home, you can qualify for the exclusion again when you sell that house. Indeed, you can use the exclusion any number of times over your lifetime as long as you satisfy the requirements discussed below." "If you meet all the requirements for the exclusion, you can take the $250,000/$500,000 exclusion any number of times. But you may not use it more than once every two years." "There are certain additional requirements you must meet to qualify for the $500,000 exclusion. Namely, you must be able to show that all of the following are true: you are married and file a joint return for the year either you or your spouse meets the ownership test both you and your spouse meet the use test, and during the 2-year period ending on the date of the sale, neither you or your spouse excluded gain from the sale of another home." Be safe, have fun, Smitty 04 CC Allure "RooII" - Our "E" ride for life! Link to comment Share on other sites More sharing options...
Kirk W Posted May 6, 2018 Report Share Posted May 6, 2018 You are wise to get professional help as you are way beyond anything that I'd consider giving advice on or taking from a forum. Please do keep us informed. You sure have an interesting dilemma. Good travelin !...............KirkFull-time 11+ years...... Now seasonal travelers.Kirk & Pam's Great RV Adventure Link to comment Share on other sites More sharing options...
Smitty77_7 Posted May 7, 2018 Author Report Share Posted May 7, 2018 Well Kirk - My DW and I both feel we've gotten into a barrel of snakes!! But, we know we did so for the right reasons of helping family. And, we'll get the right input and advice to make sure my layman's thinking/approach is not leading us down the wrong path. One thing for sure. The DW and I are looking forward to 'KISS' ahead... :)! (As long as KISS, does not end up with a reflective look bak of 'Well, that was stupid!'...:)! Best, Smitty Be safe, have fun, Smitty 04 CC Allure "RooII" - Our "E" ride for life! Link to comment Share on other sites More sharing options...
Twotoes Posted May 9, 2018 Report Share Posted May 9, 2018 Most of what you want to do only involves your Federal return. As far as Calif is concerned as long as they get their cut they will be happy. So I think if your wife files a CA tax return and pays the total of the taxes due you will not have to file a non resident return. But check with your CPA. 2015 Itasca Ellipse 42QD 2017 Jeep Wrangler Unlimited Rubicon Hard Rock Edition 2021 Harley Street Glide Special Fulltimer Link to comment Share on other sites More sharing options...
rpsinc Posted May 10, 2018 Report Share Posted May 10, 2018 I believe that 1031s apply only to investment property, not primary residences. Just thinking out loud here, but what if you sold your vacation home to an LLC of which you are the members and then take that mortgage back and so an installment sale, which would still cause you to pay taxes on the income but with the installment sale, you would not have to deal with the capital gains issue for now. Perhaps the LLC could be SD based as well. I am in a similar situation, and so interested on how and where this goes. Thanks for sharing. Marcel Link to comment Share on other sites More sharing options...
Smitty77_7 Posted May 16, 2018 Author Report Share Posted May 16, 2018 Have the the Real Estate/CPA's info, and we're doing a conference call tomorrow to wrap things up. A correction to the post I made above, about a strategy of perhaps having the DW be a California Resident, and myself retaining SD Domicile. Above I share this info from the Internet: "If you meet all the requirements for the exclusion, you can take the $250,000/$500,000 exclusion any number of times. But you may not use it more than once every two years." "There are certain additional requirements you must meet to qualify for the $500,000 exclusion. Namely, you must be able to show that all of the following are true: you are married and file a joint return for the year either you or your spouse meets the ownership test both you and your spouse meet the use test, and during the 2-year period ending on the date of the sale, neither you or your spouse excluded gain from the sale of another home." The Attorney/CPA clarified that this is true, but to get the full $500K for the sell of the home, both spouses must meet the 'Use Test". Which I would not, being Domiciled in SD. So only her $250K exemption would apply. (A side note: I educated her, and then she fact checked, the difference between 'Domicile and Resident' (Took her a bit to understand the nuances involved:)!) === As further info sharing, without going into specifics: > Much less of a difference between the 'Walk Away' amounts after taxes for either home, by waiting for 2 out of 5 Exemption to kick in. (The California Taxes, DMV, Higher Insurance, etc. contributed to this being a relatively smaller difference then either myself, or the CPA side of the Attorney had first expected:)!) > She did confirm that the Rental Properties Passive Loss Carryover, offsets as part of the overall AGI. (Not against the Depreciation Recovery, as someone had suggested to me.) (She answered many more of my questions, but more specific to us, so will not bother posting hose here.) My wife and I are waiting until I finish the wrap-up call tomorrow, then we'll sit down and kick things around. No question the selling of the Rental Property would yield the highest Walk Away funds between the two properties. And no questions that we prefer our current Vacation home (Where we raised the family, holidays, 2 weddings and 5 receptions, wife's garden and the kitchen she designed and loved, set up well for aging with a large bedroom to use, etc.). And, I suspect the wrap up call tomorrow will confirm the selling of the Rental Property will have more ripple ramifications and complications between my wife and I, and her Mom as Co-Owner's. (This would cause her aggravation, and concern - because it's her nature.). The Rental house, is also the newer structure, better built insulation wise, and has the separate quarters upstairs that could be used by us as a California Foothold ahead. From a pure financial standpoint, when my MIL 'moves on', the Step-up cost basis to us is also an advantage. And then at that time, we could then again start renting out the lower house (3BR, 2BA, 2 Car Garage) - and that would carry the costs of the property as well as should generate a small amount of positive cash flow too. (The upstairs unit is a 1BR 1BA 1,100 SF place, over a 3 Car Garage which we'd retain for our use too, and has the RV Parking spot beside it as well.) So my current thoughts are we will elect to: -Not Re-Califorinize ourselves -So no need to wait for the 2 out of 5 exemptions (Either $250K if just the DW or $500K if both of us were to return to California Residency.) -Probably sell our current Vacation Home. Give notice to the tenant, our Daughter, of our intent on moving the MIL back into the lower house at the early part of next year. We would no longer have it be a Rental Property, it would become our Vacation Home. So unless after the final review with the Attorney/CPA turns up something I've missed while reviewing her findings. Or, the DW's attachment to our current Vacation Home are too strong - I believe this the direction we'll head. A bit lower Walk Away then I'd have preferred. But the KISS approach on taxes going forward for both us and MIL. And in the future, the Step-up basis is a positive too. For those of you who do not care, sorry for being so long winded. I know reading many posts on this forum, I learned quite a bit from the generous info sharing of others. So, if this helps someone down the road, great! Best to all, Smitty Be safe, have fun, Smitty 04 CC Allure "RooII" - Our "E" ride for life! Link to comment Share on other sites More sharing options...
Kirk W Posted May 16, 2018 Report Share Posted May 16, 2018 It has made for an interesting situation and I have appreciated following it. Even though most readers may not be in CA, the whole problem still should give those with rental properties some feel for what they may eventually have to deal with. Good travelin !...............KirkFull-time 11+ years...... Now seasonal travelers.Kirk & Pam's Great RV Adventure Link to comment Share on other sites More sharing options...
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