My wife's mother has lived with us for many years, recently her brother made an offer to "reward" us for taking care of the mother: He will give us the down payment to buy a house for her, or to buy a condo for our daughter who is entering her freshman. We, of course, choose the latter but we dont know how to do this to avoid gift tax. If he makes it as a loan then it will impact our loan qualification. I'm talking about $60K here.
Thanks
2007-01-11 17:57:31 · 10 answers · asked by john 1 in Business & Finance ➔ Taxes ➔ United States
You need to talk to a good accountant to figure this out before you do anything. If you make a mistake it could cost you a bunch of money.
2007-01-11 18:05:38 · answer #1 · answered by ZCT 7 · 1⤊ 2⤋
So many conflicting answers. Now for the Banks angle on this. the maximum legal gift limit according to the IRS is 10000.00 cash per year. Any excess is subject to taxes as a gift. wich is High to say the least. since he is not actually giving the money to you per say you may be eligable to a tax exemption under banking laws. it is a little investment trick actually. since the money is being invested in the property instead of in your hands you actaully assume some liability in this. you must make payments on the house and also if its value falls or something happens to it you can be out the money. of course if things go the other way you would have to claim it as a capitol gain if and when you sell the property. of course you are allowed to wirte off the first 500,000 in person property sales before you are taxed on gains from it so I wouldn't loose any sleep on that one. Your wifes brother needs to get the proper forms from his bank to cover this gift, so you can file it at the time the property is bought. otherwise you may miss your window and end up haveing to pay the taxes. Sorry I can't remembe the name of the form, it's been a long day.
2007-01-11 18:19:51 · answer #2 · answered by nyxcat1999 3 · 0⤊ 0⤋
You will not owe any tax on this gift. Your wife's brother, however, could be liable for the gift tax if he gives more than $12,000 to any one person in 2007. As stated by another poster, this will not really be a "tax" per se, but will decrease the nontaxable amount of his estate when he passes away. That's getting beyond your question, however.
If your wife's brother wants to avoid any reductions to the nontaxable portion of his estate, he can gift $12,000 to you and $12,000 to your wife in 2007 (for a total of $24,000), then another $24,000 in 2008, and the remaining $12,000 in 2009.
Note that the $12,000 figure is valid for 2007 only and may actually increase slightly in 2008 and 2009.
2007-01-12 02:30:41 · answer #3 · answered by figment_usa 5 · 0⤊ 0⤋
Even better is if the brother is married. He can give 12k to each of you, and his wife can give 12k to each of you.
If the mother plays along, the brother and wife can also give 12k each to her, which should cover the whole 60k and then some without the brother paying any gift tax.
2007-01-12 03:17:44 · answer #4 · answered by Quixotic 3 · 0⤊ 0⤋
You do not pay gift taxes on gifts you receive. You do not pay income taxes on gifts either. You do not report gifts on any tax return.
Only the donor will possibly have gift tax consequences, but then only if his estate is large (millions). The donor may have to file a gift tax return depending on how he structures the gift, but will not be paying any gift tax on a gift of this size.
So take the gift money and get the condo.
2007-01-11 18:06:38 · answer #5 · answered by ninasgramma 7 · 1⤊ 1⤋
What you do not look to comprehend is....the lender will require that you teach the position the down price got here from. no longer having money on your monetary employer account in the previous 3-6 months...and then without notice you've the money will tip them off. they're going to ask and in case you lie...you'd be committing personal loan fraud. lenders do no longer favor to lend to those who've to borrow the down price. First rule of shopping for is in case you won't be able to have sufficient money the down price....you won't be able to have sufficient money the abode.
2016-10-30 21:37:56 · answer #6 · answered by barn 4 · 0⤊ 0⤋
He would have to give you the 60 plus whatever amount would cover the tax.
Or just let your downpayment be 60 minus the tax. That's still a good downpayment.
2007-01-11 18:04:55 · answer #7 · answered by Kacky 7 · 0⤊ 2⤋
Have him put the payment down on the house. Or atleast have him write the check.
2007-01-11 18:06:37 · answer #8 · answered by danielle Z 7 · 0⤊ 0⤋
The giver pays gift tax - not you.
2007-01-12 01:19:59 · answer #9 · answered by vegas_iwish 5 · 0⤊ 0⤋
$6000.00 each is the max he can give without you getting taxed if they haven't changes the rules recently. Beyond that all I can say is talk to an accountant.
2007-01-11 18:08:19 · answer #10 · answered by haykat 2 · 0⤊ 2⤋