Gift of Equity

Guest 0.10 Dollars($)

I posted a few months ago about my wife and I buying a house her parents own with a gift of equity. The purchase price was 50K on a 175K house with a gift of equity of 10K. The mortgage will be 40K to pay off her parents and do a few things to the house. What will be our basis in the house if we sell it x amount of years from now? Thanks for all the help on my original post.

larry · Joined: 27 Jun 2007 Posts: 3054 428.54 Dollars($)

Hi Gary,

Welcome to the forum.

As your wife's parents are gifting the equity of the property they will have to pay the Gift tax.

After certain years from now on if you sell the property and if you gain any money then you will have to pay the capital gain tax. To know about Capital gain tax please have a look at http://www.mortgagefit.com/know-how/capitalgainstax.html#14089

Feel free to ask if you have any further questions.

Best of luck,
Larry

Niicss · Joined: 03 Oct 2005 Posts: 927 137.44 Dollars($)

Welcome Gary,

You are paying only 40,000 dollars right. So whenever you sell the property, if you sell it in more than 40,000 dollars then you will have to pay the capital gain tax. But you can qualify for the capital gain tax exemption. The capital gain tax exemption limit for an individual is $250k.

Hope this helps.

Let me know if you have any further queries.

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