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My father is currently selling me a house for about $130,000 under market value. Is there anything that I should do to reduce my exposure to capital gains tax? Can he give me this equity as an early inheritance?
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Can he give me this equity as an early inheritance?

No, but he could sell to you and market value and later make you a gift of the difference (which might affect his estate tax situation).
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My father is currently selling me a house for about $130,000 under market value. Is there anything that I should do to reduce my exposure to capital gains tax? Can he give me this equity as an early inheritance?

It's his property. He can do what he wants with it.

I'm not sure what capital gains tax you're referring to. You won't have to worry about that until you sell the property. If you want less capital gain later, pay more now for the property.

Oversimplified, it looks to me like the difference between FMV and what you're paying is a taxable gift. Your father really ought to consult an estate planner.

Phil Marti
VITA Volunteer
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I am concerned about the $130k appearing as income to me, in the year I buy the house. I am also concerned about when I sell it. How would my tax base for the house be determined? Is it just the sale price and if I am single I am not taxed on the first $250k of capital gains?
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IMO, the $130k is a gift, so your father has a gift tax issue to deal with, but it not income to you in the year that you receive it. As far as your basis, I am assuming that your father's basis in the house is less than the price that you are paying for your father. So, your basis will be what you pay for the house. I'm gonna guess that your father's basis in the gift portion is zero, so you get no additional basis for that. And, assuming that you meet all other requirements for the gain exclusion when you sell, yes the first $250K of gain is excluded.

Like someone else said, your father should get some compentent estate planning advice before you complete this transaction.

Your mileage may vary.
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I am concerned about the $130k appearing as income to me, in the year I buy the house.

Gifts are not income to the recipient.

I am also concerned about when I sell it. How would my tax base for the house be determined?

What you paid for it.

Is it just the sale price and if I am single I am not taxed on the first $250k of capital gains?

If you meet the requirements for excluding gain on sale of a residence, yes. See Publication 523 and the article in the FAQ.

Phil Marti
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