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Inter-Family Sales And Taxes
Question: I can buy a home from my family. What are the major issues that will concern the IRS?
Answer: Real estate transactions tend to be major financial events, so there can be substantial tax issues. In the case of buying a home from a family member, there are several questions to raise: Are you paying a fair market price? An appraisal or market studies by real estate brokers can establish the value of the property. If your family is providing a loan, are you paying a fair market interest rate? The IRS has a minimum fair market interest rate that changes from time to time. If you are renting, are you paying a fair market rental? Brokers can document a fair market rental for a like property. If you are not paying a fair market price, interest rate, or monthly rental then it may be that you are receiving taxable income or capital gains. If the gift is sufficiently large, say more than $10,000 per year, then there may be tax and estate issues to consider. Please see a tax professional for specific advice and current information.
Written by Peter G. Miller.
© 1997 Peter G. Miller. All Rights Reserved. Rules, Disclaimers & Notices.
Copyright © 2012 Realty Times. All Rights Reserved.
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