I am a 63 year old widow, owe $60,000 on the home and have app. $100,000 equity. I want to sell him the house for $60,000 and he wiill borrow that amount so I can pay off my mortgate and gift the equity. I have not gifted any amount previously. I want my son to be able to sell the house and use the equity to purchase a home in another area of the state where he lives..
Please do not use my e-mail address.
Real Estate Attorney
I might be missing something from your fact pattern, but why not sell the house to a 3rd party yourself and then gift the proceeds that remain after paying off the mortgage and other costs of the sale to your son. If you sell to your son for $60,000 and gift to him $100,000 in equity, your son's basis in the property (which is not likely his primary residence under IRS rules) is the value of the purchase price (plus maybe some more if your basis in the property is more than $60,000), which means when your son sells for $160,000 to someone else, he may have a taxable gain to report. However, if you meet IRS's rules for the property being your primary residence, you will have NO gain on the sale, and since NC no longer has a gift tax, there will likely be NO tax payable on the gift of the $100,000 to your son (even though you will need to do a Federal Gift Tax return).
If you mean that you will sell to son for him to hold the property until you die, then sell the property...STOP. Go visit an Elder Law attorney in your area before doing anything else. You might be thinking about Medicaid planning. Medicaid planning is not a self-help thing. Do not listen to your friends and neighbors, only act after meeting with a qualified attorney. Even if Medicaid is not the reason, you might be creating a tax that wouldn't exist otherwise if you just left the property to your son in a Will.
COMMUNICATIONS MADE THROUGH AVVO DO NOT CREATE ANY ATTORNEY-CLIENT RELATIONSHIP AND ALL ANSWERS TO ANY QUESTIONS SHOULD NOT BE CONSIDERED LEGAL ADVICE. IF YOU WISH FOR MY FIRM TO REPRESENT YOU, PLEASE CONTACT ME DIRECTLY AT MGGORENFLO@GBCNCLAW.COM, AND IF WE AGREE TO REPRESENTATION, AN ENGAGEMENT LETTER WILL BE PROVIDED. ALL ANSWERS ARE INTENTED FOR LEGAL ISSUES GOVERNED UNDER NORTH CAROLINA LAWS ONLY. IRS CIRCULAR 230 NOTICE: To ensure compliance with the requirements of IRS Circular 230, we inform you that any U.S. tax advice contained in this communication or attachment hereto is not intended or written to be used and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code or for promoting, marketing or recommending to another party any transaction or matter addressed in this communication or attachment.
1 found this helpful
Financial Markets and Services Attorney
That is a pretty straightforward transaction and it would happen just like you describe. You need a lawyer to prepare the documents and to take care of paying off the mortgage. It will cost you $300-$500 in most circumstances.