My husband and I "bought" a home for our son 6 years ago. He was 20 y/o at the time & simply could not qualify himself for a home loan.Our plan was to sign this home over to our son when he was ready.
Now our son is 26 & married. He's a full time student (not working) and his new wife is the only income
. The newly weds are anxious to take this home over. My husband & I do NOT want to make a dime, we also don't want this transaction
to cost us
They have qualified for a $97,loan. We would like to explor the "gift of Equity" options but know very little about this. There is 50-60 thous in equity.
We talked with our tax
accountant and was told in one conversation the "gift of equity" was free, in a different conversation, the same man said my husband and I would be taxed on that money. (20%) , Can you help clear this up?
On paper the house is a "rental". My husband & I have poured money into the home (Furnace, windows, ect) and depriciated items on our tax forms
. We never lived in this home.
The appraised value is $120; the pay-off is $59. The bank suggested the contract price we give as much as $44, as "gift of equity". 1.)How would this be treated? 2.)What kind of capital gains
/ tax is involved? 3.) Does our son & wife take a loss of difference between the appraised value & selling price? 4.) Who gets taxed on the gift of equity (buyer or seller)? Thank you for your help