Question on selling home to son

[street]

I have seen few threads related to this subject but haven't seen this question asked.

If I wanted to sell my home to my son or anyone can I sell it for $10.00? The home would be worth a lot more then that. Can I sell it for any price I want too? Is there any legal or financial consequences that could occur?

If I lived in the home and he owned it should be any issues with that arrangement I would think.

[OldShooter]

Legal, but potentially big tax implications. Unnecessary ordinary income tax or capital gain tax for the buyer. Talk to a CPA or an elder-law attorney before pulling the trigger and make sure you understand basis step-up. Not sure what problem you're trying to solve but there are going to be better ways.

[97guns]

You can quite claim it to him tax free

[OldShooter]

Quote:

Originally Posted by 97guns You can quite claim it to him tax free

The issue comes when son goes to sell the house and has an unnecessarily low basis. I think there may be a need for a gift tax return in the event of the quit claim. Finally, if the son does not have a warranty deed it may cause difficulty when he goes to sell. All reasons to consult experts before pulling the trigger on any scheme.

[street]

Thanks and I could understand some of the issues brought up. I'm not wanting to break any laws or walk the fine line just wondering if I sell a property at a low price why it would have any repercussions for doing so.

[aaronc879]

I would speak to a professional before doing anything. I thought that you would have to file it as a gift towards your lifetime exemption. Anything over $15,000 per year has to go towards the lifetime exemption. Also, if you rent below market rate that is also a gift. Up to $15,000 per year you don't need to do anything but go over that and you need to file it... I think. Talk to a pro. You don't want to get hit with a big tax bill.

[Senator]

What are you trying to do, avoid LTC grabbing it? Or avoiding probate? Or?

Sell it to him for the maximum amount that you can to get your capital gains exclusion. What he actually pays you is a different matter. A loan can be forgiven at death.

Or have a transfer on death that you can put in the deed.

Or Quit claim it to him, and file (or not) the Quit Claim deed with the county.

Sell it to him and have a deferred payment plan, with a contract for deed.

[street]

Senator >>> For all the reasons you mentioned and there is probably more. Not for any one concern but of course to be able to sell it too him and for him to have it at the least expense for him. That may be my objective more then any thing.

You had some very good advise Senator that is what I wanted some options.

Thanks

[bingybear]

If you sell it to your son for much less than fair market value and you go into LTC, you may need to be careful of the look back period for medicaid helping with LTC. They could possibly undo the sale or just not support you for LTC.

[Bamaman]

You would do best to let the son get the house in probate. He would have the house appraised at that time and that would essentially be the "basis" of the house. Whenever he sells the house, less taxes would-be paid, if applicable.

Whenever selling any asset, you want the highest basis possible or to lower the amount of taxable. appreciation.

[Alan]

Would gifting the house get over the basis and future cap gain issue? If the house is valued at $250k then gifting the house would be the same as gifting him $250k to then buy the house.

[gauss]

Dad willed me his residence before he died. I went to Probate Court, functioned as P.R., and transferred the title to myself via a Personal Representatives Deed.

I calculated the FMV of the house on the date of death. When eventually I sell the house, I will use the FMV of the house on the date of death to establish my basis.

Dad controlled the house exclusively while he was alive. No gift taxes to worry about in this case.

A fairly easy process IMHO.

-gauss

[Blueskies123]

If you sell it to him for $10 his basis will be $10. If he inherits it his basis will be FMV when you pass. See an expert, not some guy on the internet.

[akidagain2018]

I agree with others, the most tax efficient transfer would be as part of the settlement of your estate. It transfers tax free to you, him, your estate (assuming you're under the Fed and St thresholds), and he'd get the value at the 'stepped-up' basis of FMV at time of transfer. What's your plan? You going to live there now and for the foreseeable future? Or is he? Related party sales generally still have to be accounted for (including for IRS purposes) at FMV. To do otherwise is an obvious attempt to avoid tax due.

[97guns]

My dads home was in a trust and the cost basis resets to the market value at date of his death, we sold the house a few months after he passed and paid no cap gains on it, the gains would have been around $700k

My uncle foolishly just sold off his retail building for 3.1 mil and his tax obligation is 1 million on it, I mentioned doing a 1031 exchange into some income property but only mentioned it that was all.

[street]

Thanks and some very good advise. It is interesting when questions like these come up how much a person can learn. I'm not looking to do anything that is illegal but to get your experience on how to handle homes, land and earthly possessions. I also know that your advise is still to go see an expert on the subject but the advise given is a value for thought and opens new views.

Thanks to all some great stuff.

[Freedom56]

Quote:

Originally Posted by street I have seen few threads related to this subject but haven't seen this question asked. If I wanted to sell my home to my son or anyone can I sell it for $10.00? The home would be worth a lot more then that. Can I sell it for any price I want too? Is there any legal or financial consequences that could occur? If I lived in the home and he owned it should be any issues with that arrangement I would think.

"Adding a family member to the deed as a joint owner for no consideration is considered a gift of 50% of the property's fair market value for tax purposes. If the value of the gift exceeds the annual exclusion limit ($15,000) the donor will need to file a gift tax return (Form 709) to report the transfer."

Set it up as an inheritance and you can transfer the home to your trust that your son can inherit or state the transfer of your home in your will. He will be exempt from taxes for the first $5.6 million.

[Clone]

Also, if you sell it on a contract, there is a minimum interest rate that must be charged.

A couple other things to think about. If there is a divorce in the future, will the gift of a house get split up in the divorce. If they get sued, could they lose it that way if they own it outright.

I also have a house to sell to my son. I am thinking that the correct way is to sell it to them at a fair price, with the interest rate slightly above the IRS minimum. Lengthy contract, with a transfer on death type clause. If I choose to gift them something each year to offset payments, that is an option. Or I can build an investment account using their payments, and transfer that account on death. Right now, I suspect that starting an investment account with their name as the beneficiary might make the most sense.

[bingybear]

Quote:

Originally Posted by Clone Right now, I suspect that starting an investment account with their name as the beneficiary might make the most sense.

Not sure what good this will really do. From this thread I would guess you already have them as a beneficiary. You could just have them to receive a given % of your investment assets without having a separate account. This is no negative issue to create a separate account

[target2019]

Quote:

Originally Posted by street Thanks and some very good advise. It is interesting when questions like these come up how much a person can learn. I'm not looking to do anything that is illegal but to get your experience on how to handle homes, land and earthly possessions. I also know that your advise is still to go see an expert on the subject but the advise given is a value for thought and opens new views. Thanks to all some great stuff.

There is a federal and state consideration, I would guess. As you have started, find out everything which may apply to your situation, and filter that through someone who can provide sound, legal advice.