Buy Out Partner

[wader]

Get out the shotgun! My partner is going to buy me out or I'm going to buy him out.



If I buy him out, I'm going to do a re-fi. At the sale does it only trigger his portion of the CCA or both?

 

[wgraham]

I would make sure you can actually do the re-fi before I told my partner I was going to buy him out!



But your question is about taxes. If there are gains for your partner he will have to pay them. Doesn't trigger anything for you. Talk to your accountant and lawyer to verify your personal situation.

 

[wader]

Thanks Wade,



I will make sure of that. Its a duplex and we owe 88K, and have had it since 2003.



You probabbly noticed that we have the same (uncommon) first name....the funny thing is we also have the exact same LAST name.



Nice to meet you sir.

 

[Thomas Beyer]

buying partner pays taxes on his gain, measured 50% from initial price and 50% from purchase price for 50%.



Seller pays tax on his gain of his 50% when you buy him out, your get deferred until you sell eventually.



Example:



bought for 200K, 150K mortgage. each 50% was worth 25K in 2003.

Now mortgage is 120K and it is worth 250K. Equity gain: 80K



you buy his 50% for 65K (25K plus 40Kgain). seller's gain is 40K and he pays taxes on it.

you will pay taxes on any gain above your accrued 40K gain when you eventually sell.



2nd option: you pay him not 65K, but agree on 50K. His gain is only 25K now .. and your accrued gain is 55K.