Family transfer of real estate properties

[Coronita]

[quote=Mooki]OK, my mom is not gifting me $25K. I loan her $25K over a few years of helping her out. This is a few thousands here and there. Some are not directly to her but checks to her realtor and persons fixing her house etc. Now she wants to pay me back the money she owes me, either from the proceeds of selling the house or through giving me part of the interest/equity of the house (since the house does not sell). How do we make it clear to the IRS it is a loan repayment and not a “gift”?[/quote]

I think you need to talk to a tax accountant 🙂

[SK in CV]

[quote=Mooki]OK, my mom is not gifting me $25K. I loan her $25K over a few years of helping her out. This is a few thousands here and there. Some are not directly to her but checks to her realtor and persons fixing her house etc. Now she wants to pay me back the money she owes me, either from the proceeds of selling the house or through giving me part of the interest/equity of the house (since the house does not sell). How do we make it clear to the IRS it is a loan repayment and not a “gift”?[/quote]

In that case, a quit claim deed probably wouldn’t be appropriate. You are buying the house (or an interest in it) in exchange for extinguishing the debt. I don’t know about GA laws, but in CA, you would buy the property with a written contract specifying the sales price for the interest you’re buying. Make sure the contract specifies the amount of debt you’ll be assuming in addition to your payment to her. Your payment being the debt being extinguished. (A written contract is required for a sale, but not for a gift.) A grant deed would be more appropriate. It would be a reportable sale for your mother (though not necessarily taxable, she’s entitled to the primary residence exclusion if there is a gain.) The IRS won’t have any problem with it.

[SK in CV]

[quote=Mooki]OK, my mom is not gifting me $25K. I loan her $25K over a few years of helping her out. This is a few thousands here and there. Some are not directly to her but checks to her realtor and persons fixing her house etc. Now she wants to pay me back the money she owes me, either from the proceeds of selling the house or through giving me part of the interest/equity of the house (since the house does not sell). How do we make it clear to the IRS it is a loan repayment and not a “gift”?[/quote]

In that case, a quit claim deed probably wouldn’t be appropriate. You are buying the house (or an interest in it) in exchange for extinguishing the debt. I don’t know about GA laws, but in CA, you would buy the property with a written contract specifying the sales price for the interest you’re buying. Make sure the contract specifies the amount of debt you’ll be assuming in addition to your payment to her. Your payment being the debt being extinguished. (A written contract is required for a sale, but not for a gift.) A grant deed would be more appropriate. It would be a reportable sale for your mother (though not necessarily taxable, she’s entitled to the primary residence exclusion if there is a gain.) The IRS won’t have any problem with it.

[SK in CV]

[quote=Mooki]OK, my mom is not gifting me $25K. I loan her $25K over a few years of helping her out. This is a few thousands here and there. Some are not directly to her but checks to her realtor and persons fixing her house etc. Now she wants to pay me back the money she owes me, either from the proceeds of selling the house or through giving me part of the interest/equity of the house (since the house does not sell). How do we make it clear to the IRS it is a loan repayment and not a “gift”?[/quote]

In that case, a quit claim deed probably wouldn’t be appropriate. You are buying the house (or an interest in it) in exchange for extinguishing the debt. I don’t know about GA laws, but in CA, you would buy the property with a written contract specifying the sales price for the interest you’re buying. Make sure the contract specifies the amount of debt you’ll be assuming in addition to your payment to her. Your payment being the debt being extinguished. (A written contract is required for a sale, but not for a gift.) A grant deed would be more appropriate. It would be a reportable sale for your mother (though not necessarily taxable, she’s entitled to the primary residence exclusion if there is a gain.) The IRS won’t have any problem with it.

[SK in CV]

[quote=Mooki]OK, my mom is not gifting me $25K. I loan her $25K over a few years of helping her out. This is a few thousands here and there. Some are not directly to her but checks to her realtor and persons fixing her house etc. Now she wants to pay me back the money she owes me, either from the proceeds of selling the house or through giving me part of the interest/equity of the house (since the house does not sell). How do we make it clear to the IRS it is a loan repayment and not a “gift”?[/quote]

In that case, a quit claim deed probably wouldn’t be appropriate. You are buying the house (or an interest in it) in exchange for extinguishing the debt. I don’t know about GA laws, but in CA, you would buy the property with a written contract specifying the sales price for the interest you’re buying. Make sure the contract specifies the amount of debt you’ll be assuming in addition to your payment to her. Your payment being the debt being extinguished. (A written contract is required for a sale, but not for a gift.) A grant deed would be more appropriate. It would be a reportable sale for your mother (though not necessarily taxable, she’s entitled to the primary residence exclusion if there is a gain.) The IRS won’t have any problem with it.

[SK in CV]

[quote=Mooki]OK, my mom is not gifting me $25K. I loan her $25K over a few years of helping her out. This is a few thousands here and there. Some are not directly to her but checks to her realtor and persons fixing her house etc. Now she wants to pay me back the money she owes me, either from the proceeds of selling the house or through giving me part of the interest/equity of the house (since the house does not sell). How do we make it clear to the IRS it is a loan repayment and not a “gift”?[/quote]

In that case, a quit claim deed probably wouldn’t be appropriate. You are buying the house (or an interest in it) in exchange for extinguishing the debt. I don’t know about GA laws, but in CA, you would buy the property with a written contract specifying the sales price for the interest you’re buying. Make sure the contract specifies the amount of debt you’ll be assuming in addition to your payment to her. Your payment being the debt being extinguished. (A written contract is required for a sale, but not for a gift.) A grant deed would be more appropriate. It would be a reportable sale for your mother (though not necessarily taxable, she’s entitled to the primary residence exclusion if there is a gain.) The IRS won’t have any problem with it.

[bearishgurl]

[quote=flu][quote=joec][quote=bearishgurl][quote=joec]I’ve always wondered, are there gift taxes since the equity is worth over 13k or it’s different for real estate?[/quote]

There is no “gift” here. The equity is unrealized. Sharing title to real property with a family member in the form of a quitclaim deed is not a “gift.”

-This post should not be construed as legal advice and I am not an attorney.-[/quote]

This is still confusing to me since I’m sure giving someone stock (non-sold/unrealized gains) is definitely a gift as well as automobiles, stock options (also unrealized), a collectible collection or pretty much anything else.

Is it simply just real property then? What about investment property or business interest in properties?[/quote]

BG, are you sure this is correct, since it seems like most of the other sources indicate otherwise that quit claim deeds would trigger gifting if the value was greater than $13k?[/quote]

The OP here never indicated there was actually any equity in her mom’s property. She indicated that her mom had a previous “appraisal” (last year?) for $165K and owed $100K. She stated her mom had bad credit. She also stated she was concerned her mom could file for BK in the near future. If her mom actually DOES have home equity, she would have to use it to pay her creditors if she sold the property within one year of filing BK and realized any profit, under BK reform laws. She also stated her mom owed HER $25K (presumably “off the books”). Then there is the RE commission and other closing costs upon sale, incl. poss. tent fumigation. I frankly don’t see even enough “equity” to even pay the OP her $25K in this transaction, esp. if any of the mom’s creditors get a default judgment against her in the interim (maybe one or more already have and neither the mom or the OP are aware of this).

That’s why I suggested she try to talk her mom into lowering the price to get out, since she will not move back in herself and it was a long distance (poss neg cash flow) rental and the mom already had financial problems.

We don’t have enough information to know if there’s any realized equity here as we haven’t seen a preliminary title report. We don’t know how much the property’s price needs to be lowered in order to successfully sell it after a year or so languishing on the market. A “quitclaim” essentially means, “Whatever equity I have is yours,” (or yours and mine if the mom leaves her own name on title). Just because a family member is willing to give you a “quitclaim deed,” practically speaking, it may or may not have any value.

It is the same as purchasing a “Trustees Deed” at the courthouse steps. It may or may not have any value.

As SK in CV stated, there’s no tax on this level of gifting. I am unfamiliar with many tax laws but in this case, whether or not it is actually considered a “gift” by the IRS is moot.

-This post should not be construed as legal advice and I am not an attorney.-

[bearishgurl]

[quote=flu][quote=joec][quote=bearishgurl][quote=joec]I’ve always wondered, are there gift taxes since the equity is worth over 13k or it’s different for real estate?[/quote]

There is no “gift” here. The equity is unrealized. Sharing title to real property with a family member in the form of a quitclaim deed is not a “gift.”

-This post should not be construed as legal advice and I am not an attorney.-[/quote]

This is still confusing to me since I’m sure giving someone stock (non-sold/unrealized gains) is definitely a gift as well as automobiles, stock options (also unrealized), a collectible collection or pretty much anything else.

Is it simply just real property then? What about investment property or business interest in properties?[/quote]

BG, are you sure this is correct, since it seems like most of the other sources indicate otherwise that quit claim deeds would trigger gifting if the value was greater than $13k?[/quote]

The OP here never indicated there was actually any equity in her mom’s property. She indicated that her mom had a previous “appraisal” (last year?) for $165K and owed $100K. She stated her mom had bad credit. She also stated she was concerned her mom could file for BK in the near future. If her mom actually DOES have home equity, she would have to use it to pay her creditors if she sold the property within one year of filing BK and realized any profit, under BK reform laws. She also stated her mom owed HER $25K (presumably “off the books”). Then there is the RE commission and other closing costs upon sale, incl. poss. tent fumigation. I frankly don’t see even enough “equity” to even pay the OP her $25K in this transaction, esp. if any of the mom’s creditors get a default judgment against her in the interim (maybe one or more already have and neither the mom or the OP are aware of this).

That’s why I suggested she try to talk her mom into lowering the price to get out, since she will not move back in herself and it was a long distance (poss neg cash flow) rental and the mom already had financial problems.

We don’t have enough information to know if there’s any realized equity here as we haven’t seen a preliminary title report. We don’t know how much the property’s price needs to be lowered in order to successfully sell it after a year or so languishing on the market. A “quitclaim” essentially means, “Whatever equity I have is yours,” (or yours and mine if the mom leaves her own name on title). Just because a family member is willing to give you a “quitclaim deed,” practically speaking, it may or may not have any value.

It is the same as purchasing a “Trustees Deed” at the courthouse steps. It may or may not have any value.

As SK in CV stated, there’s no tax on this level of gifting. I am unfamiliar with many tax laws but in this case, whether or not it is actually considered a “gift” by the IRS is moot.

-This post should not be construed as legal advice and I am not an attorney.-

[bearishgurl]

[quote=flu][quote=joec][quote=bearishgurl][quote=joec]I’ve always wondered, are there gift taxes since the equity is worth over 13k or it’s different for real estate?[/quote]

There is no “gift” here. The equity is unrealized. Sharing title to real property with a family member in the form of a quitclaim deed is not a “gift.”

-This post should not be construed as legal advice and I am not an attorney.-[/quote]

This is still confusing to me since I’m sure giving someone stock (non-sold/unrealized gains) is definitely a gift as well as automobiles, stock options (also unrealized), a collectible collection or pretty much anything else.

Is it simply just real property then? What about investment property or business interest in properties?[/quote]

BG, are you sure this is correct, since it seems like most of the other sources indicate otherwise that quit claim deeds would trigger gifting if the value was greater than $13k?[/quote]

The OP here never indicated there was actually any equity in her mom’s property. She indicated that her mom had a previous “appraisal” (last year?) for $165K and owed $100K. She stated her mom had bad credit. She also stated she was concerned her mom could file for BK in the near future. If her mom actually DOES have home equity, she would have to use it to pay her creditors if she sold the property within one year of filing BK and realized any profit, under BK reform laws. She also stated her mom owed HER $25K (presumably “off the books”). Then there is the RE commission and other closing costs upon sale, incl. poss. tent fumigation. I frankly don’t see even enough “equity” to even pay the OP her $25K in this transaction, esp. if any of the mom’s creditors get a default judgment against her in the interim (maybe one or more already have and neither the mom or the OP are aware of this).

That’s why I suggested she try to talk her mom into lowering the price to get out, since she will not move back in herself and it was a long distance (poss neg cash flow) rental and the mom already had financial problems.

We don’t have enough information to know if there’s any realized equity here as we haven’t seen a preliminary title report. We don’t know how much the property’s price needs to be lowered in order to successfully sell it after a year or so languishing on the market. A “quitclaim” essentially means, “Whatever equity I have is yours,” (or yours and mine if the mom leaves her own name on title). Just because a family member is willing to give you a “quitclaim deed,” practically speaking, it may or may not have any value.

It is the same as purchasing a “Trustees Deed” at the courthouse steps. It may or may not have any value.

As SK in CV stated, there’s no tax on this level of gifting. I am unfamiliar with many tax laws but in this case, whether or not it is actually considered a “gift” by the IRS is moot.

-This post should not be construed as legal advice and I am not an attorney.-

[bearishgurl]

[quote=flu][quote=joec][quote=bearishgurl][quote=joec]I’ve always wondered, are there gift taxes since the equity is worth over 13k or it’s different for real estate?[/quote]

There is no “gift” here. The equity is unrealized. Sharing title to real property with a family member in the form of a quitclaim deed is not a “gift.”

-This post should not be construed as legal advice and I am not an attorney.-[/quote]

This is still confusing to me since I’m sure giving someone stock (non-sold/unrealized gains) is definitely a gift as well as automobiles, stock options (also unrealized), a collectible collection or pretty much anything else.

Is it simply just real property then? What about investment property or business interest in properties?[/quote]

BG, are you sure this is correct, since it seems like most of the other sources indicate otherwise that quit claim deeds would trigger gifting if the value was greater than $13k?[/quote]

The OP here never indicated there was actually any equity in her mom’s property. She indicated that her mom had a previous “appraisal” (last year?) for $165K and owed $100K. She stated her mom had bad credit. She also stated she was concerned her mom could file for BK in the near future. If her mom actually DOES have home equity, she would have to use it to pay her creditors if she sold the property within one year of filing BK and realized any profit, under BK reform laws. She also stated her mom owed HER $25K (presumably “off the books”). Then there is the RE commission and other closing costs upon sale, incl. poss. tent fumigation. I frankly don’t see even enough “equity” to even pay the OP her $25K in this transaction, esp. if any of the mom’s creditors get a default judgment against her in the interim (maybe one or more already have and neither the mom or the OP are aware of this).

That’s why I suggested she try to talk her mom into lowering the price to get out, since she will not move back in herself and it was a long distance (poss neg cash flow) rental and the mom already had financial problems.

We don’t have enough information to know if there’s any realized equity here as we haven’t seen a preliminary title report. We don’t know how much the property’s price needs to be lowered in order to successfully sell it after a year or so languishing on the market. A “quitclaim” essentially means, “Whatever equity I have is yours,” (or yours and mine if the mom leaves her own name on title). Just because a family member is willing to give you a “quitclaim deed,” practically speaking, it may or may not have any value.

It is the same as purchasing a “Trustees Deed” at the courthouse steps. It may or may not have any value.

As SK in CV stated, there’s no tax on this level of gifting. I am unfamiliar with many tax laws but in this case, whether or not it is actually considered a “gift” by the IRS is moot.

-This post should not be construed as legal advice and I am not an attorney.-

[bearishgurl]

[quote=flu][quote=joec][quote=bearishgurl][quote=joec]I’ve always wondered, are there gift taxes since the equity is worth over 13k or it’s different for real estate?[/quote]

There is no “gift” here. The equity is unrealized. Sharing title to real property with a family member in the form of a quitclaim deed is not a “gift.”

-This post should not be construed as legal advice and I am not an attorney.-[/quote]

This is still confusing to me since I’m sure giving someone stock (non-sold/unrealized gains) is definitely a gift as well as automobiles, stock options (also unrealized), a collectible collection or pretty much anything else.

Is it simply just real property then? What about investment property or business interest in properties?[/quote]

BG, are you sure this is correct, since it seems like most of the other sources indicate otherwise that quit claim deeds would trigger gifting if the value was greater than $13k?[/quote]

The OP here never indicated there was actually any equity in her mom’s property. She indicated that her mom had a previous “appraisal” (last year?) for $165K and owed $100K. She stated her mom had bad credit. She also stated she was concerned her mom could file for BK in the near future. If her mom actually DOES have home equity, she would have to use it to pay her creditors if she sold the property within one year of filing BK and realized any profit, under BK reform laws. She also stated her mom owed HER $25K (presumably “off the books”). Then there is the RE commission and other closing costs upon sale, incl. poss. tent fumigation. I frankly don’t see even enough “equity” to even pay the OP her $25K in this transaction, esp. if any of the mom’s creditors get a default judgment against her in the interim (maybe one or more already have and neither the mom or the OP are aware of this).

That’s why I suggested she try to talk her mom into lowering the price to get out, since she will not move back in herself and it was a long distance (poss neg cash flow) rental and the mom already had financial problems.

We don’t have enough information to know if there’s any realized equity here as we haven’t seen a preliminary title report. We don’t know how much the property’s price needs to be lowered in order to successfully sell it after a year or so languishing on the market. A “quitclaim” essentially means, “Whatever equity I have is yours,” (or yours and mine if the mom leaves her own name on title). Just because a family member is willing to give you a “quitclaim deed,” practically speaking, it may or may not have any value.

It is the same as purchasing a “Trustees Deed” at the courthouse steps. It may or may not have any value.

As SK in CV stated, there’s no tax on this level of gifting. I am unfamiliar with many tax laws but in this case, whether or not it is actually considered a “gift” by the IRS is moot.

-This post should not be construed as legal advice and I am not an attorney.-

[bearishgurl]

[quote=SK in CV][quote=Mooki]OK, my mom is not gifting me $25K. I loan her $25K over a few years of helping her out. This is a few thousands here and there. Some are not directly to her but checks to her realtor and persons fixing her house etc. Now she wants to pay me back the money she owes me, either from the proceeds of selling the house or through giving me part of the interest/equity of the house (since the house does not sell). How do we make it clear to the IRS it is a loan repayment and not a “gift”?[/quote]

In that case, a quit claim deed probably wouldn’t be appropriate. You are buying the house (or an interest in it) in exchange for extinguishing the debt. I don’t know about GA laws, but in CA, you would buy the property with a written contract specifying the sales price for the interest you’re buying. Make sure the contract specifies the amount of debt you’ll be assuming in addition to your payment to her. Your payment being the debt being extinguished. (A written contract is required for a sale, but not for a gift.) A grant deed would be more appropriate. It would be a reportable sale for your mother (though not necessarily taxable, she’s entitled to the primary residence exclusion if there is a gain.) The IRS won’t have any problem with it.[/quote]

In this type of conveyance, SK, Mooki would get title insurance. She would be able to put a provision in her “purchase contract” that she approve the preliminary report as a condition of sale. Then and only then would she know if there is sufficient equity in it to repay what her mom owes her. IMO, she should also have a NEW appraisal done and make that a contingency as well. Of course, if she has to secure new financing to pay off her mom’s loan, then the appraisal will be mandatory.

[bearishgurl]

[quote=SK in CV][quote=Mooki]OK, my mom is not gifting me $25K. I loan her $25K over a few years of helping her out. This is a few thousands here and there. Some are not directly to her but checks to her realtor and persons fixing her house etc. Now she wants to pay me back the money she owes me, either from the proceeds of selling the house or through giving me part of the interest/equity of the house (since the house does not sell). How do we make it clear to the IRS it is a loan repayment and not a “gift”?[/quote]

In that case, a quit claim deed probably wouldn’t be appropriate. You are buying the house (or an interest in it) in exchange for extinguishing the debt. I don’t know about GA laws, but in CA, you would buy the property with a written contract specifying the sales price for the interest you’re buying. Make sure the contract specifies the amount of debt you’ll be assuming in addition to your payment to her. Your payment being the debt being extinguished. (A written contract is required for a sale, but not for a gift.) A grant deed would be more appropriate. It would be a reportable sale for your mother (though not necessarily taxable, she’s entitled to the primary residence exclusion if there is a gain.) The IRS won’t have any problem with it.[/quote]

In this type of conveyance, SK, Mooki would get title insurance. She would be able to put a provision in her “purchase contract” that she approve the preliminary report as a condition of sale. Then and only then would she know if there is sufficient equity in it to repay what her mom owes her. IMO, she should also have a NEW appraisal done and make that a contingency as well. Of course, if she has to secure new financing to pay off her mom’s loan, then the appraisal will be mandatory.

[bearishgurl]

[quote=SK in CV][quote=Mooki]OK, my mom is not gifting me $25K. I loan her $25K over a few years of helping her out. This is a few thousands here and there. Some are not directly to her but checks to her realtor and persons fixing her house etc. Now she wants to pay me back the money she owes me, either from the proceeds of selling the house or through giving me part of the interest/equity of the house (since the house does not sell). How do we make it clear to the IRS it is a loan repayment and not a “gift”?[/quote]

In that case, a quit claim deed probably wouldn’t be appropriate. You are buying the house (or an interest in it) in exchange for extinguishing the debt. I don’t know about GA laws, but in CA, you would buy the property with a written contract specifying the sales price for the interest you’re buying. Make sure the contract specifies the amount of debt you’ll be assuming in addition to your payment to her. Your payment being the debt being extinguished. (A written contract is required for a sale, but not for a gift.) A grant deed would be more appropriate. It would be a reportable sale for your mother (though not necessarily taxable, she’s entitled to the primary residence exclusion if there is a gain.) The IRS won’t have any problem with it.[/quote]

In this type of conveyance, SK, Mooki would get title insurance. She would be able to put a provision in her “purchase contract” that she approve the preliminary report as a condition of sale. Then and only then would she know if there is sufficient equity in it to repay what her mom owes her. IMO, she should also have a NEW appraisal done and make that a contingency as well. Of course, if she has to secure new financing to pay off her mom’s loan, then the appraisal will be mandatory.

[bearishgurl]

[quote=SK in CV][quote=Mooki]OK, my mom is not gifting me $25K. I loan her $25K over a few years of helping her out. This is a few thousands here and there. Some are not directly to her but checks to her realtor and persons fixing her house etc. Now she wants to pay me back the money she owes me, either from the proceeds of selling the house or through giving me part of the interest/equity of the house (since the house does not sell). How do we make it clear to the IRS it is a loan repayment and not a “gift”?[/quote]

In that case, a quit claim deed probably wouldn’t be appropriate. You are buying the house (or an interest in it) in exchange for extinguishing the debt. I don’t know about GA laws, but in CA, you would buy the property with a written contract specifying the sales price for the interest you’re buying. Make sure the contract specifies the amount of debt you’ll be assuming in addition to your payment to her. Your payment being the debt being extinguished. (A written contract is required for a sale, but not for a gift.) A grant deed would be more appropriate. It would be a reportable sale for your mother (though not necessarily taxable, she’s entitled to the primary residence exclusion if there is a gain.) The IRS won’t have any problem with it.[/quote]

In this type of conveyance, SK, Mooki would get title insurance. She would be able to put a provision in her “purchase contract” that she approve the preliminary report as a condition of sale. Then and only then would she know if there is sufficient equity in it to repay what her mom owes her. IMO, she should also have a NEW appraisal done and make that a contingency as well. Of course, if she has to secure new financing to pay off her mom’s loan, then the appraisal will be mandatory.

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