3 years ago I paid to buy a house for $47,000 but was fresh out of college and therefore could not qualify for a mortgage, so my dad signed on the house. After fixing up the house, I closed a sale for $95,800 last week. My dad deposited his check directly into my bank account and I'll be closing on my new house next week under my name. In the meantime, since my old house was not my dad's primary residence I have to pay my dad the amount of his $48,000 capital gains tax. He falls in the 25-percent income tax bracket, so this should be around a $7,200 tax which is huge for somebody on a $31,000 annual grad student stipend. I'm an honest guy, so I'm making plans to scrape this money together over the next year, but is there any legal way around this?
My old house was legally under my dads name, but I made all payments and handled all finances to do with the house. My new house is under my name, I'll be closing shortly.
Thanks for your help!