Posted on: 15th Feb, 2011 07:41 am
My parents' home was appraised at 257K. I purchased the house for 206K, with the difference being a gift of equity (51K), used as the down payment. Is the "Donor's Adjusted Basis of Gift" (Form 709, Schedule A, Part 1D) the FMV (257K), the sell price (206K), or the gift of equity(51K)?
In my opinion, the amount of equity that has been gifted to you will be consisted as Donor's Adjusted Basis of Gift. However, it will be better if you could have a word with your tax adviser and take his opinion in this regard.
You are asking an IRS/accountant question and mortgage employess are supposedly answering these questions on a mortgage web site. While you may be looking for our or anyone's opinion we are not qualified, not trained not authorized to answer your accountant question.
But, let's get the question a little clearer for a start.
Did you get a mortgage on the property when you purchase with a gift of equity? If so, what was the mortgage amount?
I ask because a lot of such transactions have a gift of 20% of the equity so there is no Private mortgage Insurance required with a 20% down payment (the gift of equity), no money required on your part for the down payment and the mortgage is 80% of the purchase price.
Your "purchase price of $206,000" stated above is 80% of $257,500 whoich looks like the value of the house.
Did you purchase for $257,000 with a 20% gift of equity and got a mortgage for $206,000? If that is the case, your purchase price is $257,000, not $206,000.
Or, did you literally purchase for $206,000? In that case there is no gift. You purchased a house for less than its value. There may be some tax implications, but, there is no gift per se.
But, let's get the question a little clearer for a start.
Did you get a mortgage on the property when you purchase with a gift of equity? If so, what was the mortgage amount?
I ask because a lot of such transactions have a gift of 20% of the equity so there is no Private mortgage Insurance required with a 20% down payment (the gift of equity), no money required on your part for the down payment and the mortgage is 80% of the purchase price.
Your "purchase price of $206,000" stated above is 80% of $257,500 whoich looks like the value of the house.
Did you purchase for $257,000 with a 20% gift of equity and got a mortgage for $206,000? If that is the case, your purchase price is $257,000, not $206,000.
Or, did you literally purchase for $206,000? In that case there is no gift. You purchased a house for less than its value. There may be some tax implications, but, there is no gift per se.
