Can my parents corporation finance my home?

[frankc29]

What is the name of your state? California

Here is the story. My parents own a corporation for which I work , it is a dairy farm in central California. I currently have a 30 year mortage at 5.75% with a balance of around 98k, the home is worth 230k. My dad and I have been talking about the possibility of having the company refinance my house, do it legit through a real estate lawyer, secure the loan, the whole ball of wax, with cash on top for me to do some home improvement. A loan in the neighborhood of 140k. The obvious reason to do this is to either make the loan a zero-interest affair, or if that is not possible, a low enough interest rate to keep the IRS happy. This would of course save me many many thousands. So here are my questions.

Can a corporation, especially an ag based corporation, make this sort of personal loan?

If the answer to the above is yes, is there a way to make this interest-free without slapping the corporation with a gift tax for their trouble? I read somewhere that adding a "on-demand" clause might so this, but it wasn't very clear.

I will be inheriting half of my parents assets, and this brings up an interesting question. In the event they pass away before the loan is payed, this brings up the scenario of a person inheriting the note to their own house?

I will be posing these questions to our CPA, but I thought I'd get some outside advice as well, to compare it with.

Thank You.

[HomeGuru]

Originally Posted by frankc29

What is the name of your state? California

Here is the story. My parents own a corporation for which I work , it is a dairy farm in central California. I currently have a 30 year mortage at 5.75% with a balance of around 98k, the home is worth 230k. My dad and I have been talking about the possibility of having the company refinance my house, do it legit through a real estate lawyer, secure the loan, the whole ball of wax, with cash on top for me to do some home improvement. A loan in the neighborhood of 140k. The obvious reason to do this is to either make the loan a zero-interest affair, or if that is not possible, a low enough interest rate to keep the IRS happy. This would of course save me many many thousands. So here are my questions.

Can a corporation, especially an ag based corporation, make this sort of personal loan?

If the answer to the above is yes, is there a way to make this interest-free without slapping the corporation with a gift tax for their trouble? I read somewhere that adding a "on-demand" clause might so this, but it wasn't very clear.

I will be inheriting half of my parents assets, and this brings up an interesting question. In the event they pass away before the loan is payed, this brings up the scenario of a person inheriting the note to their own house?

I will be posing these questions to our CPA, but I thought I'd get some outside advice as well, to compare it with.

Thank You.

**A: post in the Tax Law forum.