Dan at tartarmallow[at]yahoo.com wrote:

- quote -

Was it really a loan or was it a gift? There may have been
gift tax implications if they gave you over $11,000. Why not
take out a regular mortgage? They are typically cheaper.

All freely provided advice guarantee correct or double your
money back

Frank S. Duke, Jr. CPA
Cincinnati, OH USA

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tartarmallow[at]yahoo.com says...

- quote -

If the original loan was properly documented, ideally with a
written agreement and a lien on the property, there
shouldn't be a problem with the repayment. If the home
equity loan is more than $100,000, there can be a problem
regarding deductible interest expense.

If the relative just wrote you a check and you intend to do
the same there may be a problem. If the amount more than
$11,000? That is the limit for nontaxable gifts per person,
per year.

Gary

--
You can probably X figure out X which letters to X delete to
derive my email address X.

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- quote -

Since you're asking in a tax group, I have to assume you're
wondering about tax implications. Before you can determine
that you have to decide whether it's a gift or a loan.

Gifts have no income tax implication. If a gift exceeds the
annual limit, the donor must file a gift tax return.

Interest on loans paid to relatives is income to the
recipient just like any other interest payment. It's
deductible by the payer only if the loan is secured by the
payer's home.

If, however, we're talking about the "it's really a loan,
but my relative will sign a gift letter for the lender"
situation. That's called fraud.

Phil Marti
Topeka, KS

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Dan wrote:

- quote -

Why is this a tax question?

If the relative made you an unsecured loan to buy the house,
I see no legal impediment to "refinancing" that loan with a
home equity loan.

For tax purposes, the "home equity loan" would (probably)
NOT be an "acquisition loan", and hence deductibility would
be limited to a principle amount of $100,000, and would be
an AMT adjustment.

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If a relative to loaned you the money to buy a house for
cash, and you wanted to repay them by taking out a home
equity after the sale, could this be done, potentially?

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