Profile picture for ihatenewell

We are buying a house. For tax reasons, will sell it to our son for $1. Good/bad idea? Suggestions?

  • November 29 2010 - US
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Answers (10)

Profile picture for blue screen exile
Why pay a tax accountant or a tax professional if they still may give you the wrong answer and you would still be personally liable for the errors?

Contact the IRS directly.  There is no charge, and they have all the resources to find the answers.  That is what they are paid to do.

They ultimately will have to interpret and rule on your tax return forms anyway!

I guess commissioned sales people must just have tons of extra money for these lawyers and accountants and advisers and professionals...  Either that or they are afraid to do their own tax returns since the math and reading is beyond their skill level?  I wonder if that is why all those Realtors® keep giving really bad incorrect tax advice about itemizing interest deductions and telling people that the reason to buy is to get a small percentage of the interest they pay their lender back from the federal government?  Don't the Realtors® even know how to estimate tax bracket?

And what makes a question "great" if the answer is obvious to the most casual observer?
  • November 30 2010
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Such a great question.

Except, I would only feel comfortable if you asked a qualified tax accountant to know for sure what your tax consequences would be.



Any good Accountants out there?
  • November 30 2010
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Speak to a Tax professional who knows the laws and don't guess.
  • November 30 2010
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Profile picture for wetdawgs
What taxes are you trying to avoid?  One or the other of you will be taxed at full market value, unless you are planning to die this year.
  • November 30 2010
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Profile picture for blue screen exile
Of course if you die this year, there is no estate tax.  But if you die next year (any time after Dec 31, 2010), anything over $1 million in the estate is taxed.

There also is no capital gains on homes when you die as the property is re-based to the value at time of death.
  • November 30 2010
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Profile picture for blue screen exile
I'm baffled about which tax reasons you expect to be able to use.  As mentioned, gift tax applies to the giver for any gift over $12k in one year.  Thus a married couple can give $48k in one year to the son and spouse without gift tax liability.  But a $1 "sale" of an asset appraised at $300k is a $300k gift.  It will trigger an IRS audit.

You are better off giving the $48k (or what ever is maximum) per year.

And for tax reasons, property tax will not be set based on an extremely low purchase price that doesn't represent assessed value, and in California, transfer from parents to children does not trigger proposition-13 re-assessment, but a recent purchase does.  Income taxes?  If money is borrowed for purchase of one's own home,  the interest and points are deductible on schedule A, but if it is not your primary home or second home it isn't.  And if you give it to your son, your son gets no tax deduction benefits...

So, it makes absolutely no sense to me.

Best suggestion?
Call one eight hundred eight 2 nine, 1040; (IRS)
1(800)tax-1040

Or find them on the web at irs.gov

The IRS is there to answer your questions round the clock 24 hours a day 365 days a year at no direct cost to you.  If there really is a way to make it work to your advantage, they would be the ones that could tell you, as they are mandated by congress to implement the tax law that congress passes.
  • November 30 2010
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talk to your CPA about this - I don't think what you have in mind will "work" for tax purposes.
  • November 30 2010
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Profile picture for Sharon Lewis
I would suggest you sit down with a real estate attorney and work this through.
  • November 30 2010
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Profile picture for donpayne
That's a pretty important question to be asking a site such as that...  The tax consequences of getting that wrong could be huge for both you and your son.
  • November 30 2010
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Profile picture for droopyd
I would think there may be gift tax issues if you sell a property for clearly less than it is worth.
  • November 30 2010
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