Any one familiar with Hometap shared equity agreements?

Forum|Forum|6 years ago
December 7, 2019
14 replies
83 views

A client is entering into a shared equity agreement with a company called Hometap. Hometap is buying a 10% share of clients primary residence. They pay client upfront and then collect 10% of proceeds when client sells home. There are no loan or interest payments made by client. It sounds to me like a cap gain on the sale of 10% of the home with basis prorated to 10%. Does this sound right to anyone? Also, do you think I can take 10% of the primary residence exclusion since they would qualify for it if this were were a normal sale? I've never seen this before so thanks for any help.

ProSeries Professional

This topic has been closed for replies.

Best answer by TaxGuyBill

That is what it sounds like to me too ... a sale of 10% of the property.

However, the exclusion is NOT limited to $25,000/$50,000 (10%). You can take the full exclusion up to $250,000/$500,000. However, whenever the other 90% is sold, the combined total of all partial-interest sales is limited to $250,000/$500,000. So if you exclude $100,000 now, then when the other 90% is sold the maximum exclusion would need to be reduced by $100,000.

T

TaxGuyBillAnswer

That is what it sounds like to me too ... a sale of 10% of the property.

However, the exclusion is NOT limited to $25,000/$50,000 (10%). You can take the full exclusion up to $250,000/$500,000. However, whenever the other 90% is sold, the combined total of all partial-interest sales is limited to $250,000/$500,000. So if you exclude $100,000 now, then when the other 90% is sold the maximum exclusion would need to be reduced by $100,000.