Givner & Kaye Clarify Overlooked Real Estate Tax Implications of Same-Sex Marriage Ruling

LOS ANGELES, Sept. 13, 2013 /PRNewswire/ -- A recent U.S. Supreme Court ruling that found the federal Defense of Marriage Act (DOMA) unconstitutional has opened up a number of favorable planning options previously unavailable to legally married same-sex couples.  Specifically, there are two real estate tax implications that have been largely overlooked that these couples should be aware of according to Bruce Givner and Owen Kaye, partners in the Los Angeles estate planning, asset protection and tax law firm Givner & Kaye.

In a recent article for the Daily Journal, California's largest legal news provider, Givner and Kaye noted that the recent United States v. Windsor decision now affects two important real estate exclusions for same-sex married couples:  the sale of a personal residence and the sale of investment property.

In the sale of a primary personal residence, the IRS allows a capital gains exclusion of $250,000 for singles and $500,000 for married couples.  Legally married same-sex couples that wed following Windsor (2010) are now entitled to the larger exclusion.  If one spouse dies, the surviving spouse is still entitled to the $500,000 exclusion if the residence is sold within two years of the first spouse's death.

As to the sale of investment property, one strategy that allows the owner/seller to not recognize the entire taxable gain in the year of sale is to enter into an installment agreement with the buyer.  On every $5 million of a promissory note, the seller can defer more than $1.6 million of tax. 

Before Windsor, a California property owner could sell his investment property to his same-sex partner and take back that partner's promissory note.  The buyer-partner could hold the property long enough to have a capital gain basis, then sell the property to an outside buyer without having to recognize any capital gain since his basis was equal to the note.  However, following Windsor, a legally married same sex couple would not be able to do this since they are now related for income tax purposes unless the buyer-partner holds onto the property for more than two years before selling to an outside buyer.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara counties.

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Owen Kaye
Givner & Kaye

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