Quit-claim deed tax implications

PTD said:

What is the name of your state?What is the name of your state? Tennessee

My parents bought their home for 80,000 about 3 years ago, and still have 30,000 left to pay on the mortgage, but cannot make the high payments. They want to have us loan them the 30,000 now, so that they can pay off their current loan in full. Then, they will continue living in the house, and pay us that amount back with interest over a longer period of time (thus basically having lower payments).

My question is, also in return for us loaning them the money now, they want to quit-claim the deed over to me, basically in case somehow they end up not being able to pay off the money I'm loaning to them for this. Once they finish repaying us the loan, I would quit-claim the deed back to them. What tax implications would that have to me (and them for that matter). The property was recently appraised for 100,000, if that matters.

Click to expand...

PTD said:

I will be paying off the existing mortgage indirectly through the loan to my parents, who would then pay their lender (although if it helps tax-wise I could pay it directly to the lender, as it's not a mortgage company).

Click to expand...

seniorjudge said:

Someone else will have to answer the tax part of your question.

However, on this part, you need the lender's approval in writing before you go conveying the land without releasing the current loan.

Click to expand...

PTD said:

Thanks. I think paying off the loan in full prior to quit-claiming the deed over to me would make getting the lender's approval not necessary, correct?

Click to expand...

seniorjudge said:

If there is no loan on the land, then there will be no need for a lender's approval since there is no lender.

Click to expand...

PTD said:

Thanks seniorjudge,

Now I still have my initial question on tax implications (given that their wouldn't be a loan if I/we paid it off prior to all of this happening): Specifically, at the time when my parents quit-claim the deed over to me, and at the time that I would either quit-claim the deed back to my parents, or if I ended up selling it to someone else (capital gains tax issues).

Click to expand...

LdiJ said:

Wouldn't it simply make more sense for your parents to refinance the mortgage? If they only owe 30k on a home that would appraise at 100k it ought to be pretty easy to do.

If they can't do it alone, then you could enter in as a third owner and signer on the mortgage.

The only tax implications would be gift tax implications. Gift tax returns would have to be filed if they quit claimed the house to you, and when you quit claimed it back. However there would be no tax due unless either one of you have exceeded your maximum lifetime exclusion.

Click to expand...

PTD said:

Actually, they want to refinance it through me, by me paying off the balance and then they would pay me back that amount, with interest, over time.

I also just found out some other detail that affects all of this: Their current mortgage is through a "land contract" to the previous owner, but they have the deed (under their ministry's name), so I don't know how that would affect the tax implications, since it wouldn't be directly to family.

Click to expand...

LdiJ said:

Again, I don't understand why they don't just do this in the normal way.

However, if you have to act as their refinancer, then just write up a contract that way and put a lien on the property, rather than going the quit claim route.

I think you are making this more complicated than it needs to be.

Click to expand...

ablessin said:

they paid $50,000 in 3 years and they can't afford to pay less than half?

How many years was the mortgage to begin with? $50,000 in 3 years is a $1400 month payment - were they making extra payment on principle?

I think I would be leary to loan that sum of money to a family member.
Are they in good health? If something happened, could you afford to make the payment - or is this a cash loan

Click to expand...