Posted on: 23rd Apr, 2009 08:02 am
hi there,
my dad wants to give me his home as he is older and doesn't want the responsibility. he also would like to sell me the family farm for about 20% of its value. i own a home and rental home with mortgages. i don't have much ready cash. i have a decent income.
can he give me the house (approximately $450k value) for nothing with a quit claim deed? is there a tax burden associated as a gift? he hasn't been able to sell the home due to the market right now - and would rather give it to me than sell it really cheap to someone else.
as for the farm, he'd want about $300k, for cash during his retired years. could that be financed by me against the farm?
my estimated property values would be a combined $2.3m and the total debt/mortgages would be $700k.
could all the dept be combined into one long-term loan?
what do you think?
my dad wants to give me his home as he is older and doesn't want the responsibility. he also would like to sell me the family farm for about 20% of its value. i own a home and rental home with mortgages. i don't have much ready cash. i have a decent income.
can he give me the house (approximately $450k value) for nothing with a quit claim deed? is there a tax burden associated as a gift? he hasn't been able to sell the home due to the market right now - and would rather give it to me than sell it really cheap to someone else.
as for the farm, he'd want about $300k, for cash during his retired years. could that be financed by me against the farm?
my estimated property values would be a combined $2.3m and the total debt/mortgages would be $700k.
could all the dept be combined into one long-term loan?
what do you think?
Hi
If your father quitclaims it to you, he will be required by the law to pay gift taxes. But there are yearly as well as life time gift tax exemptions which he can claim. You can finance the farm. But considering you already have got two mortgages on your home and rental property, qualifying for another loan can be difficult for you. You can combine all the debts, but you will have to find a lender first who would like to do so.
If your father quitclaims it to you, he will be required by the law to pay gift taxes. But there are yearly as well as life time gift tax exemptions which he can claim. You can finance the farm. But considering you already have got two mortgages on your home and rental property, qualifying for another loan can be difficult for you. You can combine all the debts, but you will have to find a lender first who would like to do so.
what if the girl bought the house for 20% of the value...whould she pay an unrealized gain on the 80% difference? Providing that difference was over 250k?
Hi Joe,
When someone sells a house, the transaction is required to be at arm's length i.e. the parties involved in the sale transaction need to be unrelated to each other so a fair transaction is possible and both the parties gain something out of it. In arm's length transaction, the sale price cannot be far too different from the actual market value. In this instance, the girl was supposed to buy the house from her father at 20% of the actual price which is far below than the market price. Thus, questions will be raised over the validity of such transactions. Instead, the father could have created a will and left the property in his daughter's name.
Thanks,
Jerry
When someone sells a house, the transaction is required to be at arm's length i.e. the parties involved in the sale transaction need to be unrelated to each other so a fair transaction is possible and both the parties gain something out of it. In arm's length transaction, the sale price cannot be far too different from the actual market value. In this instance, the girl was supposed to buy the house from her father at 20% of the actual price which is far below than the market price. Thus, questions will be raised over the validity of such transactions. Instead, the father could have created a will and left the property in his daughter's name.
Thanks,
Jerry