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That's great to hear!
Your father's sales price is going to be the appraisal, not the amount that you pay for the house.
So, the sales price includes the gift of equity
So there's a gain of $318K
Of which only 68k is taxable
May I ask if your mother also lived in this house?
Is your father married would probably be a better quesiton
she did but not for 20+ years
Ok, if he was he got another $250,000
The only thing I can think of is to sell the house for $446K - but then your gift of equity will be lower
Will that mess you up with financinig?
no it wouldn't I only need enough gift of equity to keep me below the 20% so I dont have to pay morgage insurance
I have $30k cast as well
OK that's good
I would just try to sell it for $446,000
what about the appraised value doesn't it go off that?
Yes, could you get the appraisal lowered?
I wouldn't know because the morgage company would get it appraised on there own I imagine
Ahh, yes. So it probably can't be lowered.
The problem is, there's no way to avoid the capital gains on the $68K. Even if your father reinvested in a new house, the gains would still have to be recognized
There's no way to defer recognition until later on down the line
so no matter what my father would have to pay capitol gains tax on the $68k?
Unless you could get the appraisal down, there's no getting out of the capital gains tax.
there is no way to do it through a trust or another loop hole?
If he put into a trust, the trust would get his basis and then when the trust sold the asset all the capital gains would be recognized.
He would not even get the $250K benefit
Unfortunately, the tax on $68K must be paid
even though he owes $118k still i take it?
Yes, the loan does not play into the capital gain calculation.
ok so unless the house goes down in value or the appraised value goes down taxes on the $68k has to be payed correct. Also does it go off there appraisal (morgage company) or can I get it appraised myself? \
Yes, that is correct. As for the appraisal, the appraisal would be the one that the sale is based off of. So, whatever the title company uses as the fair market value - this would probably be the mortgage company's appraisal.
Is there anything else that I can assist you with today?
I'm sorry that I didn't have better news for you
so no loop holes like he puts the house in my name and I take a loan out to pay him off?
You couldn't do anything like that. He could gift you the entire house and not pay capital gains, but you could not turn around and pay him back. The IRS would look at that and say it was a disguised sale.
ok thanks for your help Megan
You're welcome. I'm sorry I didn't have better news. If there's nothing else I can assist you with, please rate as "excellent" so that I may receive credit for assisting you today