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Buying from Parents |
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What is the law about buying a home from your parents? Can they just give it to you or do they have to sell it? Also, do they have to sell it to you for what it is worth?
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Of course your folks can just give you a house. The tax rules are a bit complicated, but what they boil down to is that probably no federal gift tax would be actually paid. I don't know about your state's gift tax.
One thing you should know -- when you receive your folks' property as a gift, you also take over their cost basis for the place. If some day you sell, you could owe capital gains tax figured from that cost basis. If this is their own residence we're talking about, and they give it to you, they could lose the right to take up to $500,000 in tax-free profit when it's sold (the "homesellers exclusion.") Of course if you plan to make the place your own residence, that's a different matter.
Whether it's their residence or income property, if you waited to inherit it, you'd get a new cost basis, value at the time of their death, so that you'd have little or no capital gains tax when you sold for about the same amount.
As you can see, deciding if this is a good idea is a bit complicated. I'd recommend going together to a lawyer who specializes in estate planning to find out what fits your situation best.
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Edith
Originally published on October 15, 2007 |
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