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Real Estate w/special circumstances

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jlb1023

Junior Member
What is the name of your state? Colorado
My father has lived in his home for 11 years. He was recently let go by the company he worked for and could not continue to pay his mortgage. He offered to sell the house to my wife and I for $217,000. He owes $192,000 which we would have to pay off immediately and then pay him the remaining $25,000 over the course of 5 years. The house is expected to appraise for $255,000. We plan to pay him $15,000 immediately out of a second and then the remaining $10,000 over the next 2-3 years rather than 5. Are there any tax consequenses to either my father or my wife and I?

Don't know if this factors in or not but my father has moved into an appartment and my wife and I moved into the house. We have been paying the mortgage and have already put $15,000 worth of upgrades in the house which is part of why we expect it to appraise for that amount.
 


How are you paying off the 192K? Mortgage in your names or cash?

If you simply take over his mortgage it is most likely FRAUD, if not then an appraisal will be needed to obtain your own Mortgage.

If by chance you plan to keep that mortgage, fraudulently without notification to the bank, then HE is the one who will have all the tax advantages as he, the loan holder, is the ONLY one who can take the deductions for interest and taxes. Of course none of that matters if you are obtaining your own Mortgage.
 

Snipes5

Senior Member
The information posted by "freespeech" is not necessarily accurate.

The loanholder is NOT the only person who can claim the deductions. It isn't as simple as merely claiming them, but it can be done.

If the purchase is done properly, with all the usual paperwork, neither of you will have any tax consequences from the sale of the house.

Get assistance from a Real Estate Attorney in doing the paperwork correctly.

Snipes
 

jlb1023

Junior Member
Addendum

Thank you for the info. Just to clarify we are getting a mortgage to buy out his existing loan. My concern was the amount of the "gift" exceeding the $22,000 annual limit by $3,000. The reason we are currently paying his mortgage is he lost his job and we had to wait till our house sold before we could get financing to buy his house.
 

Snipes5

Senior Member
The $25,000 isn't a "gift", you are paying it back. As long as you set up proper terms, and a contract, it will not be considered a gift.

What WILL be considered a gift is if he sells the property to you for less than Fair Market Value.

The difference between selling price and FMV will be considered a gift (if there is a difference).

For example, IF FMV is $255,000 and he sells you the house for $217,000, the difference is $38,000 which will be considered a gift.

Talk to a couple of realtors and find out the going price for such a house in that area, to see whether there is "gift" involved or not.

If there is gifted equity, and it is greater than $11,000 per recipient and donor, then Dad will have to file a gift return, although no tax will be due.

Snipes
 

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