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Richard
Richard, Lawyer
Category: Real Estate Law
Satisfied Customers: 55711
Experience:  32 years of experience as lawyer in Texas. I'm also a Real Estate developer.
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Say my dad want to sell me this house below market value.

Customer Question

say my dad want to sell me this house below market value. how does that work
JA: Because real estate law varies from place to place, can you tell me what state this is in?
Customer: nj
JA: Has any paperwork been filed?
Customer: no
JA: Anything else you want the lawyer to know before I connect you?
Customer: no it is just something we are thinking about doing
Submitted: 2 months ago.
Category: Real Estate Law
Expert:  Richard replied 2 months ago.

Hi! My name is Richard & I will be helping you today! It will take me a few minutes to type a response to your question. Thanks for your patience!

Expert:  Richard replied 2 months ago.

Good afternoon. Are you wondering what the tax impact of this would be? Thanks.

Customer: replied 2 months ago.
if it is legal
Expert:  Richard replied 2 months ago.

Thanks for following up. Yes, this is perfectly legal. There is nothing to legally prohibit your dad from selling his house to you for less than its fair market value. It would be considered a part gift/part sale. The gift portion would be the value over the amount you pay for the property. But, there would be no tax impact of the gift. First, pursuant to Section 102 of the Internal Revenue Code, gifts are not income and thus do not need to be reported on the income tax return. There should be no gift tax consequences. 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 $5,490,000 lifetime exemption....which means a person can give a cumulative amount of up to $5,490,000 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 $5,490,000.

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