Gift of equity and capital gains tax

Status
Not open for further replies.

MNuser

New Member
I am selling a second home (no longer my homestead) to stepdaughter and son-in-law. I bought the property in 1986, basis should be $130,00-140,000 when everything is added up. The mortgage broker has suggested a gift of equity for financing purposes, with a sales price of $210,000 and gift of $30,000 for $180,000 to enable them to show downpayment/equity for their mortgage.

I understand the closing company will issue the 1099-s for $210,000.

Will capital gains be based on the $210,000 or the $180,000? I read conflicting statements on the internet. It seems to me it should be the $180,000 since the buyer's basis will be $180,000. The gift tax return is not a concern. I do not want to pay capital gains tax on the $30,000 since I will not get it or ever see it.

Thanks for your help.
 
I am selling a second home (no longer my homestead) to stepdaughter and son-in-law. I bought the property in 1986, basis should be $130,00-140,000 when everything is added up. The mortgage broker has suggested a gift of equity for financing purposes, with a sales price of $210,000 and gift of $30,000 for $180,000 to enable them to show downpayment/equity for their mortgage.

I understand the closing company will issue the 1099-s for $210,000.

Will capital gains be based on the $210,000 or the $180,000? I read conflicting statements on the internet. It seems to me it should be the $180,000 since the buyer's basis will be $180,000. The gift tax return is not a concern. I do not want to pay capital gains tax on the $30,000 since I will not get it or ever see it.

Thanks for your help.

Before you pull the trigger on this, it is to your benefit to discuss this with your CPA or tax attorney.

It is no more wise to seek tax and/or legal advice from a real estate salesperson, than it would be to a seek medical advice from your plumber!

Beyond the specifics of the particular tax advantages on the sale, the greater effect or impact is best known on your entire tax situation.

In your state, you'll have to answer to the state tax jackals, as well as the federal tax lions!
 
Have you considered selling it to them on contract? As Army Judge stated It's time to talk with a CPA or Tax attorney.
 
Status
Not open for further replies.
Back
Top