My grandma is selling me her house. She owns it outright and is going to carry the contract herself, but there will be no actual contract. She is going to transfer title to me so it will show I am the sole owner. How can we do this and avoid as much taxes as possible? Can we just say I bought the house for $1? And what legal issues are we up against? She and her deceased husband purchased the house over 50 years ago for $11,000. Any help with this would be greatly appreciated.
There are some tax exemptions for family transfers of property. I would meet with a lawyer to make sure you can make the most of your situation.
How close is grandma to dying? That sounds morbid. However, that is a critical factor.
If grandma dies and leaves the house to you, likely no taxes will be owed (unless grandma has a lot of other assets). And your cost basis in the house would be its market value on the date of grandma's death.
"Can we just say I bought the house for $1?" You can, but that would be lying and people can be put in jail for lying on the excise tax affidavit and on their income tax return. If the house was bought 50 years ago, its current market value likely is over (after subtracting the cost basis and expenses) the capital gain amount that grandma can exclude from the sale of her principal residence.
Grandma and you likely should consult with an attorney who can review all the relevant facts and go over the options with the two of you.
I don't practice law in Washington, but most states have exemptions to capital gains for transfers within the family that are non-monetary. Also, when transfers are made for "token" consideration (unless the transfer falls within an exception, such as a parent-child transfer), usually, the assessor is entitled to assess for market value. If you are not using realtors, you should speak to an experienced real estate attorney, to make sure your transaction satisfies the applicable laws.
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