Posted on: 09th Mar, 2010 09:00 am
my husband and i bought a house. as we had a short time in this country, my niece and her husband contracted the loan. now we want to pass the house to our name. we paid all the expenses, installments, taxes, related to the house, timely. so we have a credit approved to buy again the house (for $125,000), as was requested for my niece (she did not accept to refinance). the appraisal of the house is $250.000 and the mortgage broker did a "gift equity" for the difference. how that "gift equity" could affect the taxes of my niece and her husband? do they have to pay any amount of taxes for that "gift equity"?, and finally, could refinance the mortgage of the house affect my niece and husband taxes negatively? really, a do not want to cause them any damage.
thank you for your professional answer.
gilda
thank you for your professional answer.
gilda
I am not an accountant, so, can not give you such advice., Maybe an accountant will answer.
That being said, I'll put my two cents worth in and perhaps give you a couple things to check out.
Everybody is allowed to give anybody a $13,000 gift in any given year. So, the niece and her husband could give you $13,000 and $13,000 and do the same for your husband. So, the the two of them can give the two of you $52,000 in gifts with no tax implications. Over that they pay a gift tax unless they get around it some other way that an accountant may know, I do not.
While the mortgage is structured with a purchase price of $250,000 and that makes the gift of equity $125,000, it may be possible to purchase for $177,000 and a gift of equity of $52,000. The mortgage is still at 70% of value. Should be ok.
Not being an accountant, not sure if a problem "selling" for less than its value.
That being said, I'll put my two cents worth in and perhaps give you a couple things to check out.
Everybody is allowed to give anybody a $13,000 gift in any given year. So, the niece and her husband could give you $13,000 and $13,000 and do the same for your husband. So, the the two of them can give the two of you $52,000 in gifts with no tax implications. Over that they pay a gift tax unless they get around it some other way that an accountant may know, I do not.
While the mortgage is structured with a purchase price of $250,000 and that makes the gift of equity $125,000, it may be possible to purchase for $177,000 and a gift of equity of $52,000. The mortgage is still at 70% of value. Should be ok.
Not being an accountant, not sure if a problem "selling" for less than its value.
Thank you for your advice. I will try to contact and lawyer and a accountant to complete the information.
Gilda
Gilda
Hi Gilda,
As far as the gift of equity is concerned, I'd just like to add that in addition to the annual gift tax exemption of $13k as mentioned by John, one is also entitled to a life time gift tax exemption of $1 million. Thus, if the amount of the gift of equity exceeds $13k, it can be adjusted with the life time exemption. Thus, your niece and her husband may not have to pay any tax for the gift of equity. However, it is always better to consult an accountant regarding this.
As far as the gift of equity is concerned, I'd just like to add that in addition to the annual gift tax exemption of $13k as mentioned by John, one is also entitled to a life time gift tax exemption of $1 million. Thus, if the amount of the gift of equity exceeds $13k, it can be adjusted with the life time exemption. Thus, your niece and her husband may not have to pay any tax for the gift of equity. However, it is always better to consult an accountant regarding this.
There are several ways to structure gifts, but, a CPA needs to be involved to help you structure it properly.
You can also have a large gift in the form of a loan with no or minimal payments due. Every year the loan holder gives you a gift of $13,000 or $26,000 if joint loan holders or $52,000 if there are two borrowers. That way you get rid of the gift in a year or two or three and never lose your one time lifeltime exclusion.
You can also have a large gift in the form of a loan with no or minimal payments due. Every year the loan holder gives you a gift of $13,000 or $26,000 if joint loan holders or $52,000 if there are two borrowers. That way you get rid of the gift in a year or two or three and never lose your one time lifeltime exclusion.