i want to buy my mom's house. will pay fair market value. she want to sign it over to me and then i pay out my 3 siblings their share. she no longer lives in the house. would that work or is it better for us to buy it from her and her divide the money with my sibs.
Will you be using the house as your personal residence for at least two years or will you be using it in some other way (such as rental)?
The tax consequences for you will depend on if you can later sell it without paying tax on the gain if it will be your residence.
Thanks for the information.
will not be primary residence. not looking for a tax gain. will eventually be a retirement home (in TX)...we currently live in WI. not planning on renting it out. my mother in law mt stay there a few months out of the year...winter there...we already have a 2nd vacation home that we claim
The only difference between your mother gifting the house to you (presuming she will not exceed her one million dollar lifetime Gift Tax exemption) and you buying it from her is the cost basis you will have in the property. The cost basis is what you will use as the basis of your cost (plus expenses of buying plus improvements) when you sell.
For gifted property you use the cost of the donor, which is what your mother paid initially and for improvements. For a purchase your purchase price is your cost basis (plus the other items mentioned).
If your mother gifts you more than $12,000 in one year she has to file a gift tax return. However, there is no gift tax due until she has given more than one million in gifts that were over the annual limit during her lifetime. See Gift Taxes for more information and links to forms.
If you give more than than $12,000 in one year to a sibling you also would have to file a gift tax return. That would happen if she gift the house to you and then you make gifts to your siblings.
If you are not concerned with the amount of gain on your eventual sale (which would be less if you buy rather than are gifted the home) then either method has very similar results.
There are some jurisdictions that a sale would incur transaction fees, stamp taxes and such that can be significant (New JerseY comes to mind); but for sales in Texas is that is not a major consideration. You may want to verify what the transaction cots for each type of transfer if all other factors are close to being equal as it seems to be in your case.
I hope this helps give you the general Rules for buying as compared to getting the house as a gift.
I've prepared all types of taxes since 1987.