What is the name of your state? - California
My parents cannot take care of their home any longer. They owe about 50K on a 650K home, which my sibling and I have been paying for. My sibling would like to take over the home; however for tax purposes (both parents and our sake) we would like to purchase the property from my parents at the best tax advantage possible price, since property tax will rise with the sales and/or current appraised value. Our parents want to let go of the home and just let us take care of it; as they continue to live there. So, we need to figure out how to divide this among the both of us. My sibling would not be able to qualify for a 500K loan without my help. So, both of our names will be on the loan. I would rather cash out on the home and have nothing to do with it.
We were thinking of purchasing the property for 500K (for tax purposes) from my parents. 70K payoff current loan and other bills. 100K I would like to cash out. And my parents’ puts 300K back into the house, so we can make a reasonable payment. Leaving a total owed amount of 170K and the rest is for my sister.
Mathematically:
500K sale – try to avoid gain taxes for parents
-50K –loan
-20K – bills
430 K goes back into the house from my parents
70K – total loan amount
Then we would re-financed the home under only her name for the remaining amount of 70K and take out 100K to cash me out, making the total loan amount to be 170K which she would qualify for.
This way our parents lets go of the home, live there and avoid tax penalty of gains
My name gets off the home and I cash out.
My sister can take the home and has a lesser tax gain on the sale of the home in the future.
And the loan on the home is affordable.
HOWEVER:
• Is this okay? Are there any posed concerns with this?
• Would the 430K that goes directly to the home be considered a gift from my parents? What are the posed tax concerns?
• What are the precautions that I should be aware of?
• When I cash out, what are the tax concerns? What if I use it as a down payment?
• Would we be able to purchase the home for 500K, if it is appraised for 650K or does it depends on tax appraisal?
I also post this in the tax section as I think it may apply both.
Please help.
My parents cannot take care of their home any longer. They owe about 50K on a 650K home, which my sibling and I have been paying for. My sibling would like to take over the home; however for tax purposes (both parents and our sake) we would like to purchase the property from my parents at the best tax advantage possible price, since property tax will rise with the sales and/or current appraised value. Our parents want to let go of the home and just let us take care of it; as they continue to live there. So, we need to figure out how to divide this among the both of us. My sibling would not be able to qualify for a 500K loan without my help. So, both of our names will be on the loan. I would rather cash out on the home and have nothing to do with it.
We were thinking of purchasing the property for 500K (for tax purposes) from my parents. 70K payoff current loan and other bills. 100K I would like to cash out. And my parents’ puts 300K back into the house, so we can make a reasonable payment. Leaving a total owed amount of 170K and the rest is for my sister.
Mathematically:
500K sale – try to avoid gain taxes for parents
-50K –loan
-20K – bills
430 K goes back into the house from my parents
70K – total loan amount
Then we would re-financed the home under only her name for the remaining amount of 70K and take out 100K to cash me out, making the total loan amount to be 170K which she would qualify for.
This way our parents lets go of the home, live there and avoid tax penalty of gains
My name gets off the home and I cash out.
My sister can take the home and has a lesser tax gain on the sale of the home in the future.
And the loan on the home is affordable.
HOWEVER:
• Is this okay? Are there any posed concerns with this?
• Would the 430K that goes directly to the home be considered a gift from my parents? What are the posed tax concerns?
• What are the precautions that I should be aware of?
• When I cash out, what are the tax concerns? What if I use it as a down payment?
• Would we be able to purchase the home for 500K, if it is appraised for 650K or does it depends on tax appraisal?
I also post this in the tax section as I think it may apply both.
Please help.