lifeisgood[at]pacbell.net (Rick S.) wrote:

- quote -

If you structure it this way you will be required to file a
gift tax return for the difference between the property
value and the sale price. That could end up increasing the
amount of estate tax your estate will pay.

One way around this is to sell it for the full price, taking
back a note for the amount over $300,000. Then you can
forgive note payments as they come up. As long as the
payments come in at under $11,000 per year (or $22,000 if
you are married and file an election, or $44,000 if your
granddaughter is also married and you also want to benefit
her husband), no gift tax will be incurred.

On the other hand you may incur income tax on the interest
income you forgive.

- quote -

I believe the answer is no, but others here will be able to
give you better information on this point.

Stu

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"Rick S." <lifeisgood[at]pacbell.net> wrote:

- quote -

yes to the tax liability.

But a couple of questions for your lender:

1. if the house is worth $400k, isn't that the "value" to be
used when determining LTV?

2. isn't the $300k loan really a 75% LTV?

You may also have gift tax issues if you "sell" her the
house for less than its FMV, but that may not be a problem
depending on your situation. Or, it may not be the best way
to go. No info to work with.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

I'm going to sell my house to my grandaughter. It is easily
worth 400K+, but I want her to have it for 300K. It is free
and clear, only paid 16K, 20K on improvements, lived there
forever, so with the 250k exemption I wouldn't be paying
much tax on the gain. However, her lender, to enable the
buyer to get a nice 5.785% 30yr fixed with no PMI, wants to
jack the 'price' up to 375K, so that a 'gift of equity'
would effectively make it an 80% LTV, or 20% down in other
words, and still net us our 300K. Here's the question: since
the 75K extra on the purchase price would exceed the 250K
exemption, would it be subject to the IRS 15% capital gains
tax and Calif tax?

Thanks in advance,
Rick

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >