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Chad Caros
Chad Caros,
Category: Tax
Satisfied Customers: 32
Experience:  Owner/ Managing Director at Caros Group
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I financed a piece of property and built a house with my

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I financed a piece of property and built a house with my daughter for her and her husband. When I/ we obtained the property I put it in my name only....maybe a mistake. They are going to get a mortgage now and pay me back. I'm not selling it to them...I have just been their bank for this project. They have put a lot of their money and labor into this project. My question is: How do we avoid excise tax when they pay me back?
JA: Because real estate law varies from place to place, can you tell me what state this is in? PayPal, Debitcard or credit card are all fine.
Customer: Washington
JA: Has anything been filed or reported?
Customer: No
JA: Anything else you want the lawyer to know before I connect you?
Customer: not that I can think of

Hello, My Name is Chad.

To clarify:

The property is currently titled in your name.

Your daughter and her husband plan on obtaining a mortgage with a bank and use the proceeds from the mortgage to pay you back.

Once you are paid back, you will then transfer the title to your daughter or your daughter and her husband.

Answer

The excise tax is a tax on the transfer of the title. I'm in New York where the tax is two dollars for each $500.

For example: on a property with a sale price of $200,000 the excise tax would be $800.

If I understand you correctly the title transfer/sale price will be:

1) what you paid for the land Plus, your cost. Labor, materials, etc.

The transfer price should be far less then the fair market value since your daughter and husband have put their own money and labor into the project. You can't avoid the excise tax, unless your state doesn't have it, but you can minimize the tax.

This applies if you are receiving your return of capital only. If the bank is paying you the full loan to value amount directly then keep good records for your taxes.

With the information given, I think you did a good job of limiting the excise tax while also limiting your liability, but make sure you document everything.

Before your daughter and son in law finalize the mortgage agreement with the bank, I would make sure I understood the how the settlement check will be written and processed.

If you have any follow up questions please let me know.

If this answer was satisfactory then please take amoment to rate my service.

If you have any follow up questions please let me know.

Regards,

Chad CFP ® professional

HelloCustomer

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Please let me know if you have ANY remaining questions .

Thank you for your time.

Regards,

Chad CFP ® professional

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