Capital Gains and Losses
Questions and comments about tax rules for buying and selling stocks, mutual funds, real estate and other assets.
Parent sale of family home to Adult child under appraised value
Posted by: needtoknow, February 5, 2017 05:59PM
We plan to sell our 52 yr. old family home to our adult child for $200K, but it is appraised for property tax
purposes in NJ for $496K. We have moved out of state
and we are happy to have this willing buyer. Who or
what might object to this low sale price for all cash? The house has wood siding,and a good roof, but has never been renovated structurally because it was very well built.

Re: Parent sale of family home to Adult child under appraised value
Posted by: Drewremedy, February 5, 2017 06:57PM
The appraised value may or may not be even close to fair market value ...but let's assume its close ..

.in theory one could argue that a sale well below market value is a part sale and a part gift ...which gift should be reported on form 709 .....and you may be pushing that side of envelope

There is another wrinkle that a low price and or a gift gets the new owner a low cost basis which could bite if they resold in short order .

I'm a bit nervous about too big a discount ..probably will not raise eyebrows, but double check .

I might feel a bit safer with a higher paper price and a proper recorded note at AFR for the excess over the cash ..and you can make annual gifts a separate discussion....just me .....

Re: Parent sale of family home to Adult child under appraised value
Posted by: caesark, February 14, 2017 04:22PM
The sale you propose is not likely to be questioned by anyone. You are entitled to sell your home to anyone for any price you wish.

As to the mentioned potential gift and Form 709, unless you are talking about multi million $$ estates, this is nothing to worry about.

Re: Parent sale of family home to Adult child under appraised value
Posted by: Drewremedy, February 14, 2017 09:21PM
In a perfect world there may be nothing to worry about ...but a bargain sale begets the buyer a low tax basis ...that may be fine 98% of the time ...but if buyer sells in short order he might get taxed on gain...or have problems getting a loan if some recorded sale value is wacky or if marriage hits the rocks and "equity" gets split...not everything is smart via a low paper price ..elderly parents who sell a home too cheap and then inside an5 year window need Medicaid may not like the views ...at least be sure everyone is on same wavelength and don't too cute unless. You are sure family facts fit .



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