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DJPERDUTO

Receiving cash for buy-out in an interesting way

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Not sure if this is the correct forum for this question; please feel free to redirect me!  Several months ago, I became 50/50 owner of my dad's house with my younger brother after dad's passing.  I have a good job and family, pay my taxes and do what is requried by law.  Little brother has always lived with dad who enabled him do make money by getting paid in cash.  Little brother wants ALL of the house so he can continue his life style and honestly I want OUT of the house because I want nothing to do with what goes on there and have a family to protect.  Little brother wants to buy me out IN CASH, cash that was not made by the book, etc..  Well that is the only way he can buy my half interest.  Is there anyway this arrangement can work?  I feel stupid for asking this questions, but is there a chance I can accept cash for my half of the house and would I be putting myself in jeopardy for doing so?  Othe suggestions as to how I might get out from under this half interest would be appreciated.  Thank you.

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You have not mentioned the value of the property and that may be significant.  There is no reason why you can't sell your interest in the property for cash (or bushels of corn for that matter).  The only concern is that transaction in case for more than $10,000 must be reported to the IRS.  See, https://www.irs.gov/businesses/small-businesses-self-employed/form-8300-and-reporting-cash-payments-of-over-10000.  If you report such a cash transaction to the IRS it could trigger two questions (1) did the person paying all that cash file income tax returns showing that kind on income, and (2) did the case come from legitimate business or did the transaction constitute money laundering from illicit activities?

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Any other suggestions as to how i can get out of this half interest?  The amount in question is way over ten grand.  Answer to (1) and (2) is no.  Looking at your link above,, does it only apply to businesses or also to a real estate transation?

 

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2 hours ago, DJPERDUTO said:

Any other suggestions as to how i can get out of this half interest?  The amount in question is way over ten grand.  Answer to (1) and (2) is no.  Looking at your link above,, does it only apply to businesses or also to a real estate transation?

 

I will leave your question to tax counsel.. But it is fairly clear that if you deposit more than $10,000 cash, the bank will report the transaction to the IRS.

 

I would advise you to get yourself divorced from the property in any event.  If your brother is growing unlawful vegetation on property that belongs partially to you you may very well be facing arrest.  If he is doing so and hands you $10,000 or more in cash from the profits  that may put you away for a long time.

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11 hours ago, RetiredinVA said:

The only concern is that transaction in case for more than $10,000 must be reported to the IRS.  See, https://www.irs.gov/businesses/small-businesses-self-employed/form-8300-and-reporting-cash-payments-of-over-10000.

 

Actually the OP would not have to report that cash transaction on a Form 8300 because it is not cash that is received in the course of his trade or business. And if the OP deposits the cash directly into his own account at his bank the bank is not obligated to report the transaction simply because the amount exceeds $10,000 either. That's because the deposit into his own bank account provides a way for the government to trace the funds should it be necessary to do so. The whole point of the currency transaction report (CTR) Form 8300 is to provide the government a means to trace cash transactions that otherwise would leave no records.  The bank will report it if there are circumstances that make the transaction “suspicious.” That is a suspicious activity report (SAR) and it takes more than just the amount of the deposit to make a transaction suspicious. This is where the bank requirements to know its customers come into play. Banks look for patterns of activity by their customers that are inconsistent with what they know about their customers and that may be indicators of money laundering or other criminal activity.

 

What the OP will need to do is report his gain from the sale of his interest in the home on his income tax return. Fortunately for the OP there is likely little or no gain on the sale if he got his entire interest in the home by inheritance from his father as his basis in his 50% interest will be half of what the fair market value (FMV) of the home was on the day his father died. So unless the home has really shot up in value in the time since his father died, there is likely little income tax to pay for the sale of his interest. In short, in terms of filings with the IRS, all the OP needs to worry about here is reporting the sale on his income tax return (Form 1040) (and any similar reporting for the state), and since there will likely be little tax on it, there is no incentive here to try to avoid reporting it.

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19 hours ago, DJPERDUTO said:

Little brother wants to buy me out IN CASH, cash that was not made by the book, etc.

 

What does "not made by the book, etc." mean?  And how do you know this?  By the way, are you actually contemplating a situation which he gives you $X00,000 in cash (as opposed to a check)?

 

 

19 hours ago, DJPERDUTO said:

Is there anyway this arrangement can work?

 

Yes.

 

 

19 hours ago, DJPERDUTO said:

is there a chance I can accept cash for my half of the house and would I be putting myself in jeopardy for doing so?

 

You can accept whatever you want.  Whether you'd be putting yourself in jeopardy of something obviously depends on how you answer my questions above.

 

Might be a good idea to seek advice from a local real estate attorney.

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Thanks for your input;  I now have enough information to move forward.  I am making an appointment with both a tax attorney and a real estate attorney.  Again, thanks to all above for taking the time to advise me.

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