Posted by mcmuney on October 28, 2003 at 12:00:06:
As far as I know, there is no gift involved here. Your mom is simply selling her home at a discounted rate. No one can tell your mom what price to sell the property at. Therefore, no tax liability for your mom.
By the way, as long as you own and live in a property for more than 2 years, the gain resulting from a sale in NOT taxable. IRS does not even require you to report the transaction.
Hope that helps!
Gift of Equity - Posted by Beth
Posted by Beth on October 27, 2003 at 13:31:01:
Hello -
I know a gift of equity has been covered before, and it sure is a great idea. But I would like to know what the tax implications will be for my future mother-in-law.
Here is the scenario:
My fiance and I will be married in December, 2004. His Mom bought a home down in Florida in October of 2002 and moved. BUT she still owns the home he lives in, in NY. She has very little left to pay this home off.
She is selling us the house. It appraises for $400K. She is selling us the house for $260K. We would like to buy the home now, before we are married but only put down 10%. We were pre-approved by a lender - without an mortgage insurance necessary with a gift of equity in the amount of $140K.
My question is, will she get hit with a large amount of gift tax?? My accountant said NO. He said that is not considered a reportable transaction and the IRS can’t tell her what to sell the house for.
But others have said that she will have to pay “gift tax” and I have also seen this indicated on the internet.
Is there any way for us to determine if this will occur and if so is there a way to avoid it OR to estimate what she will owe so we can pay it for her?
Thanks!
Beth