Home Buying in 98034>Question Details

Theshadowwri…, Home Buyer in 98034

Can you buy a house for a friend or family member without them taking a big tax hit?

Asked by Theshadowwriter, 98034 Tue Aug 18, 2009

I want to know if I purchased a house for a friend or family member, that would technically be income for them, so could I pay the cost of the house and the taxes or is there no way for them not to get hit?
I know if I gifted the money, they would have to claim anything after $10000, but in this case it would be more in the realm of hundreds of thousands. If you can pay the taxes, is that income too? seems like a redundant circle.
The other thought is to rent for the cost of the property tax for the year... but I'm guessing there are rules for that too.

Thanks in advance to all that respond!

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This is more legal advice, and you should really consult a tax adviser. I will tell you that I believe you are wrong in what you're thinking, and that it's actually you that would have the tax consequences (or loss of tax attributes) if you did this and it actually was a gift (as opposed to say hidden compensation for past/future services).

If you can afford to make that kind of a contribution, you really need your own professional advice regarding the tax consequences.

Also, if this is going to be a financed transaction, with just you lending your credit, perhaps a down payment and them paying off the loan, the answer would likely be different. And in that case issues besides tax liability come up. What I'm thinking of there is ownership issues and the fact that I really don't think people are doing other people a favor getting them into financial transactions that they don't qualify for on their own. The chance of their default is very high, and there's also a chance that their default will drag you down with them. So before you do something like that I'd again consult an attorney.
1 vote Thank Flag Link Wed Aug 19, 2009
It depends on how you structure this. A house, in and of itself is not "income". I can pay cash for a house, after closing I can remove my name (Quit Claim) from the Title and Quit Claim my child on. Either for "love and Affection" (no money has been exchanged) or a dollar, or any mutually agreed upon amount. whatever. If there is a dollar amount, you're talking literally selling the house to the other party, and then there is excise taxon that amount . The only taxes my child would be responsible for would be the property taxes, up until the time the child decides to sell the property. Then there would be Capital Gains to pay if not reinvested.
0 votes Thank Flag Link Wed May 29, 2013
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