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I have a question regarding warranty deed, making it as sale

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Hi
JA: Hello. How can I help?
Customer: I have a question regarding warranty deed, making it as sale plus gift for partial equity
JA: Because consumer protection law varies from place to place, can you tell me what state this is in?
Customer: Florida
JA: Has any paperwork been filed?
Customer: no
JA: Anything else you want the lawyer to know before I connect you?
Customer: that is it for now

Hello! I will be reviewing your question and posting a response momentarily; if you have any follow up questions please respond here. Thanks!

Hi; what is your question please?

Customer: replied 3 months ago.
My father-in-law purchased a house in 2011 for 130k and we are renting this same house since 2012 from him. Now we wish to purchase this house from him, but at the same time, he wants to sell this price at the same price that he paid for, but current market value for this house at zellow is $229k. I would like to know how should we close this transaction, with less tax consequence. Let me know!

Thank you for your patience;

any gift of equity will be a gift for tax purposes;

so if the gift equity is more than $14,000 then a gift tax return would need to be filed ( a person can gift $14,000 per year, to both parties, so for $28,000, without filing a gift tax).

Here is that form:

https://www.irs.gov/uac/about-form-709

No gift taxes are due until the giftor gifts $5.43million dollars.

Please see:

https://www.irs.gov/businesses/small-businesses-self-employed/forms-and-publications-estate-and-gift-tax

Some people will gift the annual gift tax in equity for one year, and in January the following year gift the additional amount, to avoid having to file the form 709 (so retaining a partial interest in the home) but that is usually not a concern unless the giftor has or expects to reach the lifetime gift exclusion of $5.43million

Further questions? Please post here to continue the chat.

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(no additional charges are incurred).

Information provided is for educational purposes only. Consultation with a personal attorney is always recommended so your particular facts may be considered. The terms addressing this can be viewed here:

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Thank you and take care.

Also a quit claim deed is more common than a warranty deed when it is by gift-because then the grantor does not make any warranties; but rather just transfers their interest (or a portion) to the grantee.

Customer: replied 3 months ago.
Like I said that I would be paying $130k for this purchase as well, and remaining would be gift equity. then which kind of deed should I go with? Because I would like to retain title insurance benefit so that is why I was interested for warranty deed. How do we do warranty deed if it is mixed with cash payment + partial gift equity? Let me know.

Title insurance companies typically require a warranty deed so the grantor can execute that.

A warranty deed can be used for a combination gift/purchase; the price paid would be listed as the consideration; please see sample here

Further questions? Please post here to continue the chat.

Satisfied? Kindly rate positively so I receive credit for assisting you. I hope that you feel I have earned

5 stars 🌟🌟🌟🌟🌟*****

as I strive to provide my customers with great service. ☺️

(no additional charges are incurred).

Information provided is for educational purposes only. Consultation with a personal attorney is always recommended so your particular facts may be considered. The terms addressing this can be viewed here:

http://ww2.justanswer.com/terms-service-0#information

Thank you and take care.

Customer: replied 3 months ago.
Thank you! is it mandatory to declare the exact price that I am paying for this purchase? For example, current market price at zellow for this house is around $229k, and I would be paying $130k and remaining as gift equity. Then do I have to declare $130k as sale price? or Just declare $10 bucks and other valuable for consideration? when we go to register the deed to county office, then do they ask us to declare the exact sale price? /// In this case, when my father-in-law files his taxes, then will he mention $130k as sale price for this property? or does he have to declare Market Value for this house? Thank you!
Customer: replied 3 months ago.
As per IRS, this home should be sold at fair market price. then how do we calculate this? Do we use the appraisal value as it is listed at county website? or use zellow estimate market value? Thank you!

Normally people will either get a FMV opinion from a realtor, but a professional property appraisal is more common in case it is contested;

as with anything with the IRS, it comes down to what is determined to be the FMV (for example, online estimates are not authoritative and most courts won't accept those) and if there is a portion that is gifted the law is to report it if over $14,000 per year -there is no gift tax until the lifetime maximum is reached; it is just a way for the IRS to keep track.

Please see this advisory from the IRS:

https://www.irs.gov/publications/p17/ch14.html

If sold below FMV to family the IRS will re-assess the property upon an audit if the FMV is not used for capital gains purposes for the seller.

Further questions? Please post here to continue the chat.

Satisfied? Kindly rate positively so I receive credit for assisting you. I hope that you feel I have earned

5 stars 🌟🌟🌟🌟🌟*****

as I strive to provide my customers with great service. ☺️

(no additional charges are incurred).

Information provided is for educational purposes only. Consultation with a personal attorney is always recommended so your particular facts may be considered. The terms addressing this can be viewed here:

http://ww2.justanswer.com/terms-service-0#information

Thank you and take care.

Customer: replied 3 months ago.
Thank you! Since my father-in-law plans to sell this house at below FMV, then what should we declare as selling price in recording documents? Or do we just declare $10 for recording purpose?

The recording documents would indicate the price sold; the tax issue is a separate issue - that is declared on one's tax returns if they owe capital gains (there is an exception for personal residence if the party lived in the home for 2 of the past 5 years- not sure if that is applicable)

Customer: replied 3 months ago.
Is it mandatory to declare the sale price for recording purpose? or is it possible to keep it private? Thank you!

It must be on the deed; please see:

http://www.leeclerk.org/index.asp?Type=B_BASIC&SEC=%7B8A8EC9F7-06E6-4A69-8AD9-1F87A04D0812%7D&DE=%7B4B5A91AB-8CE7-40C2-9E9F-84ACAD0B6527%7D

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