Real Estate Law
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They would be deemed to have made a gift to you for the value of the property minus the debt you are paying off. There would be potential gift taxes due from them over the annual exemption amount of $14K each. So parents could automatically exempt $28K of the gift and then could use up a small portion of their "lifetime gift tax exemption" of $5.45 million by filing an IRS Form 709 with their taxes in the year of the gift to avoid any taxes at all.
So basically they are giving you $85K in equity, $28K of which is exempt. So they can file the 709 Form to exempt the rest and avoid paying any gift taxes on the transfer at all.