What about in situations when a seller sells a house to a buyer (unrelated) for much less than market value because they are desperate to sell in a bad housing market? Why wouldn't that be considered a gift to the seller as well? Simply because they are not related??
2007-05-23 13:11:20 · 5 answers · asked by pc 1 in Business & Finance ➔ Renting & Real Estate
And also.. how low is too low? If the market value is 100k and it sells for say 90k... is that a gift? Is there some threshold you must exceed in discounted price to consider it a gift?
2007-05-23 13:13:35 · update #1
I assume that you are asking for IRS purposes? Just off the cuff I can only refer to the non-taxable gift provision of $10,000 to any person, whether relative or not.
Beyond that amount it is taxale and that is where it becomes an issue whether or not it is a gift.
The best way is to have a chat with the IRS officers in charge of gift tax and any other colleague he/she may recommend to get an idea/opinion from. IRS officers are very specialized, one officer may not have the answer to the whole picture and you may need to consolidate the answers to come to what you really want to know.
However, if you are not in a hurry, put it in writing on line. The IRS is pretty good about answering questions in writing/by e-mail.
2007-05-23 13:28:24 · answer #1 · answered by Maria Y T 1 · 0⤊ 0⤋
Yes, it's because you're related that it's considered a gift. For a sale in a bad housing market like you mention, the fair market value IS lower than it would have been otherwise.
2007-05-23 13:16:06 · answer #2 · answered by Judy 7 · 0⤊ 0⤋
The issue is: Is this an arm length transaction.
Now then it is hard to prove that it is when it is between immediate relatives like in your case, the documentation to prove that it is an arm length transaction and that the prices are what they were agreed upon by the parties without gift issues present is paramount.
Since you know more of the facts in your transaction here is what the IRS has to say, maybe you can pick through it and find the right answer
IRS: Selling your Home Publication: http://www.irs.gov/publications/p523/index.html and http://www.irs.gov/publications/p523/ar02.html
IRS: Home Sale Exclusion rules, publication: http://www.irs.gov/newsroom/article/0,,id=105042,00.html
IRS: Estate and Gift Taxes:
http://www.irs.gov/businesses/small/article/0,,id=98968,00.html
IRS: Tax information when buying a home: http://www.irs.gov/publications/p530/ix01.html
and if all else fails contact them
IRS: Contacting your local IRS office: http://www.irs.gov/localcontacts/index.html
Best of luck to you
2007-05-23 13:46:23 · answer #3 · answered by newmexicorealestateforms 6 · 0⤊ 0⤋
It doesn't have to be. But a lot of times you get better rates by receiving a "gift of equity" since you are financing less than 100% of the house value. You can purchase it without the gift but you will have higher interest rates since it is considered a 100% purchase.
2007-05-23 15:01:35 · answer #4 · answered by Ryan M 2 · 0⤊ 0⤋
It is considered a gift because your mom could "give" it to someone else and not to you. Its a gift just because you know her.
2007-05-23 13:48:58 · answer #5 · answered by Anonymous · 0⤊ 0⤋