Buyin property for less from Pops, Tax issues... HELP!!
ok i am new to this forum and need a lil help...
I am buyin a townhouse from my dad in the near future (a month or so) and need information about mortgages and taxes. The property i am purchasing is worh $120K when my dad is selling it to me @ $70K. Now i heard that if you purchase the house at a lower rate than what it is appraised at you need to file it as a gift "letter" not 100% sure how this works and i am a newbie at this tax thing... from what i hear is that my dad will get taxed or ill get taxed for this gift letter since it is well over $11K. Also last year my dad gave me a gift of $16K. If anyone has info as to how myself and my dad should handle this, please let me know!! any assistance would be greatly appreciated!!!
sorry if i didnt make this more clear
ju6ganutz,
Is your Dad married? If so, then both he and his wife can each give you $11K per year tax free for a combined gift of $22K.
Are you married? If so, then your Dad can give you and your spouse a total of $22K per year tax free, or, $44K if your Dad and his wife combine their gifts to you and your spouse.
The amount of the gift that exceeds the annual tax free gift exclusion is reported on a Gift Tax Return (Form 709) by the giver. Gifts are never taxable to the recipient. Amounts reported on Form 709 reduce the giver's unified credit for future gifts and federal estate taxes.
Under the current tax laws, gift taxes are not assessed until the giver has aggregated taxable gifts over his lifetime that exceed his unified credit (used to be $650K but may have gone up to $1MM in lockstep with the federal estate tax unified credit). Once this lifetime unified credit is used up, gift taxes are assessed on future taxable gift amounts that exceed the unified credit. Until then, the Gift Tax Return is just an information return.
Now, in your case, it appears that your Dad will be giving you a gift of equity of $50K. The amount that this $50K exceeds the annual gift exclusion would be reported on your Dad's Gift Tax Return and filed with his 1040.
The "gift letter" that you refer to is not an IRS thing, but instead is more likely a lender requirement for the loan you are trying to obtain.
Quote:
On 2003-06-02 09:14, DaveT wrote:
ju6ganutz,
Is your Dad married? If so, then both he and his wife can each give you $11K per year tax free for a combined gift of $22K.
Nope not married
Quote:Are you married? If so, then your Dad can give you and your spouse a total of $22K per year tax free, or, $44K if your Dad and his wife combine their gifts to you and your spouse. Nope im not married
Quote:The amount of the gift that exceeds the annual tax free gift exclusion is reported on a Gift Tax Return (Form 709) by the giver. Gifts are never taxable to the recipient. Amounts reported on Form 709 reduce the giver's unified credit for future gifts and federal estate taxes.
Under the current tax laws, gift taxes are not assessed until the giver has aggregated taxable gifts over his lifetime that exceed his unified credit (used to be $650K but may have gone up to $1MM in lockstep with the federal estate tax unified credit). Once this lifetime unified credit is used up, gift taxes are assessed on future taxable gift amounts that exceed the unified credit. Until then, the Gift Tax Return is just an information return.
Now, in your case, it appears that your Dad will be giving you a gift of equity of $50K. The amount that this $50K exceeds the annual gift exclusion would be reported on your Dad's Gift Tax Return and filed with his 1040.
The "gift letter" that you refer to is not an IRS thing, but instead is more likely a lender requirement for the loan you are trying to obtain.
thanx for the input - what if i resumed the mortgage from my dad then refinanced it with another bank? currently the APR is 7.25% which is high in and most likely can have it at 5.28% with my current employer only problem with that is there is a lot of costs with resuming the refinancing - also there is the closing costs - buyin a house is too much of a hassle but its worth the investment <IMG SRC="images/forum/smilies/icon_mad.gif"> <IMG SRC="images/forum/smilies/icon_rolleyes.gif"> <IMG SRC="images/forum/smilies/icon_frown.gif"> [ Edited by ju6ganutz on Date 06/02/2003 ]