Splitting Up Big Gains

If you expect huge gains from selling a house -- more than can be excluded from tax under the new rule -- you should consider ways to divide ownership of the house.

For example, say a couple owns their residence together with their adult son (perhaps because they have given him a share). If he meets the ownership and use tests as to one-third of the property, the son may sell his share for a $250,000 gain without incurring a tax. His parents could simultaneously sell their share for $500,000 without tax, sheltering the entire $750,000 gain.

If you are looking for other ways to take the bite out of your tax payments, read Lower Your Taxes in 7 Easy Steps (Nolo), by attorney Stephen Fishman.