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Posted by Bill on April 24, 2006, 10:54 am
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nobody@nospam.not (Han) posted:
> The question must have come up before, but
> I'd like to hear the latest thoughts of your
> eminences on the subject.
> Son and DIL want to buy a condo, but lack the
> desired downpayment (they can come up with
> the required on their own). Mom and Dad can
> gift some more money in 2006 before the gift
> tax forms apply (12K x 2 x 2 = 48K), but want
> to loan more.
> What are the diverse ways to loan/gift 20K
> more? Is it more beneficial to now gift the
> money and fill out the gift tax form, or is it
> better to make it a loan, then forgive/give back
> the "Mom and Dad mortgage payments" on a
> yearly basis?
Your figure of $48K is correct. If you're determined to
avoid the gift tax form, you should prepare an arms-length
contract for any additional funds provided, with an interest
rate that is equivalent (or close to) market rates -- e.g.,
5% - 6% at least. You would not necessarily have to file a
second mortgage, but the document should have that "flavor."
You should expect your son+ to make the interest payments
periodically.
Now, if you subsequently decide to "gift" them some
additional reduction in the principal owed, that's another
question, for another tax year. Your accountant doesn't want
to hear anything about it at all, and your son shouldn't
either. <wink>
Bill
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