My parents gifted me $24,000 ($12,000 / each) to help me buy my first house. I recently sold the house after just over a year of ownership because plans in my life have changed. My parents are asking for the money back since I no longer have the house. Because the money was provided as a tax free gift can I just give it right back with no tax issues? What would be the tax requirements if any?
2007-05-30 03:54:47 · 9 answers · asked by ulmer79 1 in Business & Finance ➔ Taxes ➔ United States
Yes, give each of your parents back the $12,000 they gave to you. Write a separate check to each of them, not just one check.
2007-05-30 04:00:16 · answer #1 · answered by Judy 7 · 0⤊ 1⤋
You can give the money back with no tax issues, as you can give a gift of up to $12,000 per person in a year with no gift tax return needing to be filed. But it appears that if your parents want the $24,000 back that they "gifted" you then they are treating it as a loan rather than a gift. But, on the sale of your house, since you owned and lived in it for less than two years, if you sold it at a gain, you will have to pay capital gains taxes on the gain. The good news is that because you held it for longer than 1 year the gain will be long-term gain rather than short term gain.
2007-05-30 05:21:34 · answer #2 · answered by Anonymous · 1⤊ 0⤋
Your parents gave you the money. I agree with others that you are under no obligation to give them the money. However, if they are asking for the money back, it seems it was a loan instead.
First, as others have suggested, you could just give them each $12,000 with no tax consequences, if you choose. However, if you have a gain on your house, at least equal to $24,000, then you will be paying $3,600 income tax on that money.
If they had structured the loan to be secured by the house, then the $24,000 returned to them on the sale of the house would not be part of your gain.
Sorry for your circumstances, do what you think is the right thing for you.
2007-05-30 04:39:54 · answer #3 · answered by ninasgramma 7 · 0⤊ 0⤋
You can not "return" the money because it would be a loan. If you choose to provide each of your parents with a "gift" in the amount of $12,000 there would be no tax consequences to you or them. You may have a gain from the sale but that has nothing to do with the "gift" from your parents.
2007-05-30 04:10:36 · answer #4 · answered by ? 6 · 0⤊ 2⤋
Yes, you can make a gift of $12,000 to each of them without having to file a gift tax return.
Even if it were treated as a loan from them to you there would not be any tax consequence unless you showed interest income on your tax return. Your parents could have made a gift loan to you of up to $100,000 without charging you interest. They would have had to report some interest income on their tax return if you had interest on your tax return.
2007-05-30 06:06:49 · answer #5 · answered by waggy_33 6 · 0⤊ 0⤋
If you give it back, that will constitute a gift to your parents from you. Given the amount, you could give them $12k each without owing any Gift Tax, however a Gift Tax return will be required. If you give them $11,999 each, no return is required.
Do bear in mind that you are under no legal obligation to return the money if it was a bona-fide gift. Your conscience and peace within the family may dictate otherwise, or course.
2007-05-30 04:06:12 · answer #6 · answered by Bostonian In MO 7 · 1⤊ 2⤋
No taxes. Yes you should write them each a check for $12,000.
2007-05-30 04:06:31 · answer #7 · answered by Anonymous · 0⤊ 0⤋
Give each of your parents $ 12,000.00. No tax consequences for any involved.
2007-05-30 03:58:48 · answer #8 · answered by acmeraven 7 · 2⤊ 0⤋
A gift is a gift... Yes you will need to pay taxes on it. Your parents deserve the moral respect from you if you don't plan on reinvesting in another home then you must pay the taxes on it and give it back. After all, you DID buy the house with it and you DID live in ut for a year. It is the least you dould do.
2007-05-30 04:00:43 · answer #9 · answered by Anonymous · 0⤊ 8⤋