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Richard
Richard, Tax Attorney
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Experience:  29 years of experience as a tax, real estate, and business attorney.
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My son bought an apartment, a foreclosure, about 18 months

Customer Question

My son bought an apartment, a foreclosure, about 18 months ago for $ 76000 and I provided him an interest only mortgage for $100,000 with the anticipation of doing alot of upgrades, which we did not do. Spent only about $ 5000 on paint and flooring.

He and his wife have now bought a new house and he no longer wants the apartment, so they want to sell it or transfer it back to me.

I was thinking maybe a quit claim deed might do the trick as it is worth what he paid for it plus improvements, but I have heard that there might be gift taxes may be owed.

From a tax standpoint, is it better for him to quitclaim it to me or to sell it to me?
Submitted: 10 months ago.
Category: Tax
Expert:  Richard replied 10 months ago.
Hi! My name is XXXXX XXXXX I look forward to helping you!

There would be no tax involved in this transaction. Rather, he is simply transferring the property to you in satisfaction of the loan your provided...much like a deed in lieu of foreclosure. He would make this transfer by quit claim deed. If the value of the property is not worth the outstanding balance of the loan, you can treat the excess of the loan being forgiven as a gift. But, there will be no gift tax resulting from this. 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 $5,250,000 lifetime exemption....which means a person can give a cumulative amount of up to $5,250,000 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 $5,250,000.



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Richard, Tax Attorney
Category: Tax
Satisfied Customers: 45717
Experience: 29 years of experience as a tax, real estate, and business attorney.
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Expert:  Richard replied 10 months ago.
Thank you so much for the positive rating! I truly appreciate you taking the time to do that!

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