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buy parents house

Posted on: 14th Sep, 2006 09:37 am
I live in the Boston area and am interested in purchasing my parents home for a
reduced price. The house is probably worth about $600000, we would pay about
$300,000.

We would then have my parents continue to live in the house as they do now while
my husband and I live in the in law apartment (which is currently vacant). I
have two questions.

1) I have 2 brothers. How would they work into this whole situation? They both
have their own homes and have no interest in living in this house. I am aware
that the house would be an inheritance down the road.

2) How would this work for my parents tax wise? They are both over the age of
75 and have owned the house for 45 years.

Thanks for any advice!
Hi Aimee,

Capital gain taxes are applicable at the time of sale of house. But your parents can avail tax exemptions on the profit up to $500,000, which is the limit for married couples. The exemption amount is $250,000 in case the owner is a single person. If you are going to pay only $300,000 as you have mentioned then I think there will be no taxes.

Also let me add that this tax exemption is allowed if you use the house as your primary residence for at least two years (the two years might not be consecutive also) out of a total of five years before the house is sold.

Thanks
Blue
Posted on: 14th Sep, 2006 12:36 pm
I think if the home is in the name of your parents only and your brothers have no objection to it being sold to you, then you can go through with the purchase and would have no legal complication to face.

Humphries
Posted on: 14th Sep, 2006 05:13 pm
Hi Blue,

I think you have misunderstood the query. The house is sold at a reduced price, so there's no profit. Then how can the parents pay capital gains tax. This tax is applicable on the gain incurred by selling the property. But here there is no gain.

Caron.
Posted on: 14th Sep, 2006 10:27 pm
Hi Aimee,

If you purchase the house and the title deed shows your name on it, you will be the owners of the property. Also, if none of your brothers have any interest in the property, then they cannot claim their rights on any part of it.

Regarding the taxes, your parents will not have to pay any amount. Rather you need to make tax payments on the property as you will be the owner.

Regards,

Jessica.
Posted on: 14th Sep, 2006 10:29 pm
Thank you all for the advice. I have also heard that if a parent sells property is sold to a child for a significantly reduced price it is considered a gift and the seller has to pay a gift tax. Does anyone know about this?
Posted on: 18th Sep, 2006 01:04 pm
Hi Aimee,

What you have heard is correct. If a person sells something at less than its value, it is considered as a gift. In that case, the seller has to pay a gift tax. But there is a certain exemption limit to the taxes on gift property.

Refer to our previous discussion on Gift tax for more details on this issue.

Thanks,

Caron.
Posted on: 18th Sep, 2006 08:38 pm
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