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Richard
Richard, Lawyer
Category: Real Estate Law
Satisfied Customers: 54012
Experience:  32 years of experience as lawyer in Texas. I'm also a Real Estate developer.
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My husband and I took out a home loan brother and wife about

Customer Question

My husband and I took out a home loan for his brother and wife about 8 yrs ago (short sale for a good price). They couldn't qualify because of recent bankruptcy. They lived in the house with their 4 children and paid us the monthly loan pymts and taxes. Now they are again in financial trouble and are selling the house. It is closing around the 13th of March.
We signed a quit deed to them. Is this a wise thing to do and will we be liable for capitol gains or anything else?
We handled it as a second home for the life of our loan, deducting interest, and my husband stayed with them when he traveled to Colorado to visit family. We are giving his brother all the equity in the sale and are only getting back our down payment. No gain. Thanks Jill
Submitted: 9 months ago.
Category: Real Estate Law
Expert:  Richard replied 9 months ago.

Good afternoon Jill. My name is ***** ***** I look forward to helping you.

You shouldn't be liable for capital gains as you are selling it for the amount of your downpayment...so there would be no gain on the sale since your purchase price was the downpayment plus the loan. And, you would have no gift tax on the transfer of the equity...the portion of the transfer over the return of your downpayment would be considered a gift. Recipients of gifts are not subject to gift tax. And, there should also be no gift tax due from the donor. Each donor can give $14,000 per year per person under the annual gift exclusion. In addition to that, for any amounts in excess of the $14,000 in a year, each person has a $5,450,000 lifetime exemption....which means a person can give a cumulative amount of up to $5,450,000 in gifts over and above the $14,000 annual gift exclusion amount without incurring gift tax....the donor must file a gift tax return to let the IRS know how much of the lifetime exemption is being used, but there will be no gift tax until cumulative additional gifts have exceeded the $5,450,000.

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