Home Page link  

Loan to family for home purchase

  
Groups | Search | About
User Password
Register Now! Lost Password?

Taxes General Forum - Tax professionals meeting place and answers to queries. (Moderated)

 Post an article  get this group's latest topics as an RSS feed add this group's latest topics to your My MSN content add this group's latest topics to your My Yahoo content  add this group's latest topics to your Google content  YahooMyWeb Yahoo!  Google Google  Windows Live Favorites Windows Live  del.icio.us del.icio.us  digg digg  Add to Netscape Netscape
Subject Author Date
Loan to family for home purchase Han 04-23-2006
Posted by Seth Breidbart on April 24, 2006, 11:33 am
Please log in for more thread options
> Son and DIL want to buy a condo, but lack the desired
> downpayment (they can come up with the required on their
> own).
>
> 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?

For tax purposes, lending the money and foregiving the
entire loan next year (you don't want to let it continue,
because it generates interest income to the parents each
year it's outstanding) is probably better, though if the
parents' estates aren't large it might not matter if they
use up some of their $1 million lifetime gift exclusion.

For mortgage purposes, banks really don't like people
borrowing part of their down payment, so a gift works much
better.

Seth

<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Paul Thomas, CPA on April 24, 2006, 11:33 am
Please log in for more thread options
> 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?

At least two things come to mind. The debt they owe needs
to be disclosed on their loan applications. And the IRS may
consider the fact that they didn't make one single payment
on the "debt" and call the whole thing a "gift" and wonder
why you didn't file the gift tax return.

It might be best to gift them what they need and file a gift
tax return and get it past you.

--
Paul Thomas, CPA
paulthomascpapc@bellsouth.net

<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Han on April 25, 2006, 7:49 am
Please log in for more thread options

>> 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?

> At least two things come to mind. The debt they owe needs
> to be disclosed on their loan applications. And the IRS may
> consider the fact that they didn't make one single payment
> on the "debt" and call the whole thing a "gift" and wonder
> why you didn't file the gift tax return.
>
> It might be best to gift them what they need and file a gift
> tax return and get it past you.

Thanks for all your advice, everyone. Thus far I have gone
the route of the 48K gift. Anything more I will have to
cogitate on. Possibly filing a gift tax return is the thing
to do. Will have to find out whether New Jersey has any
special rules ...

--
Best regards
Han
email address is invalid

<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Han on April 25, 2006, 7:49 am
Please log in for more thread options

>> 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?

> At least two things come to mind. The debt they owe needs
> to be disclosed on their loan applications. And the IRS may
> consider the fact that they didn't make one single payment
> on the "debt" and call the whole thing a "gift" and wonder
> why you didn't file the gift tax return.
>
> It might be best to gift them what they need and file a gift
> tax return and get it past you.

Thanks for all your advice, everyone. Thus far I have gone
the route of the 48K gift. Anything more I will have to
cogitate on. Possibly filing a gift tax return is the thing
to do. Will have to find out whether New Jersey has any
special rules ...

--
Best regards
Han
email address is invalid

<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Similar ThreadsPosted
Can I purchase an equity interest in family real estate w/o tax consequences February 27, 2008, 4:37 pm
Tax consequences of family loan? September 20, 2007, 10:46 pm
Home Purchase Question! June 22, 2006, 8:58 pm
Transfer of Prop 13 benefits when inheriting family home via Trust? April 14, 2007, 12:07 am
Wire Transfer for home purchase April 24, 2008, 9:45 pm
401k, ira, first home purchase - rollover questions April 28, 2007, 4:25 pm
Advantages of having mutual fund company withhold taxes for first-time home purchase distribution? March 20, 2007, 3:05 pm
Second Home loan interest deduction April 15, 2006, 3:18 am
Can I buy a foreclosure and repair the house with a Home Equity Loan? January 15, 2007, 2:26 am
Can I deduct home(office) purchase as business person AND private person? December 12, 2007, 5:22 pm

Contact Us | Privacy Policy
This site is not affiliated with Intuit - makers of Quickbooks and Quicken software
This site is not affiliated with Sage Software - makers of Peachtree accounting software
XML SitemapXML Sitemap