| Refi vs purchase of inherited house??? |
|
|
|
|
|
allicat1214
First Time Poster
Cash: $ 0.25
Posts: 1
Joined: 01 May 2006
|
| Refi vs purchase of inherited house??? |
 |
|
I need your help!
I inherited 1/4 interest in my father's home. The succession has been officially filed at the local courthouse and the taxes paid.
One brother wants to buy out the other three heirs. We all agree on price, but I'm a little concerned about how we are being asked to do this.
My brother has no money for a down payment, so his loan specialist is suggesting that he do a refinance of the property. Then the other three siblings would have to sign a document saying we donate the property to him, then three days later we get paid off.
I don't understand how it could be a donation if we're getting paid. Also, we're selling it below appraisal. Would that mean we're gifting something to him and would we have tax issues for 2006 tax year? Would he have tax issues if he's paying each of us off (more than the $11,000 limit)??
I'm in Louisiana and I know there are some differences in law because of Napoleonic code, but don't know if this impacts the taxes.
Any advice would be much appreciated!!
|
Mon May 01, 2006 4:53 pm |
|
|
Stock Mama
Full Member
Cash: $ 13.80
Posts: 68
Joined: 06 Apr 2006
|
I'd talk to an accountant and an estate attorney. The idea of "donation" doesn't sit well in this deal. I think you may be right about gift taxes, which is not something you'd want to be stuck with. If the brother really wants the property, maybe he'd do better to save up the down payment. If he can't do that, he may end up with more house than he can afford -- which may be why he's trying to broker a strange deal, in hopes of being able to afford the house.
|
|
Tue May 02, 2006 3:15 am |
|
|
bong12187
Preferred Member
Cash: $ 24.50
Posts: 120
Joined: 31 Jul 2005
|
quote:
Originally posted by coaster
Sounds fishy to me, too. But I can't advise you on the tax implications. I'm concerned about the ethical and trust issues as well as tax.
Ethical question? Hmmmm... Maybe... It is definitely a gray area zone.
However, If I am in the same situation, I will take the recommendation. It is definitely legal to relinquish your share from an inherited account or property. Having said this, the brother can then put the title under his name and do a refinance. Doing a refinance is not dividend, hence, it is not taxable. The brother can then do a gift tax of 10k per person. So for husband and wife (and if they have 2 kids) they can then give 20k (40k with the kids). This is definitely legal.
Now, if the brother does not follow through with what he has to do, then the other siblings are out of luck...
|
|
Sat May 06, 2006 9:44 pm |
|
|
bong12187
Preferred Member
Cash: $ 24.50
Posts: 120
Joined: 31 Jul 2005
|
quote:
Originally posted by coaster
Seems to me there was a deception proposed:
quote:
...Then the other three siblings would have to sign a document saying we donate the property to him, then three days later we get paid off. I don't understand how it could be a donation if we're getting paid...
and that's the ethical issue that concerned me. But, perhaps I didn't read it correctly.
You are right Tim, if they were to get paid off, then that is a problem and it is not a gray area anymore. However, if they were to receive them as gift then it should be within the law...
|
|
Sat May 06, 2006 11:44 pm |
|
|
Blue Eyed Cat
Contributing Member
Cash: $ 2.90
Posts: 29
Joined: 12 Jul 2006
Location: Central Florida
|
I suggest another scenario. The 4 of you refinance the house. Each of you gets your cash. Then the one who wants to buy has cash for the down payment and goes and gets a mortgage. Give him a reasonable amount of time because now you have a mortgage to pay each month. If he cannot qualify for a loan, put it up for sale. Make sure everyone agrees to all of this in writing before you start. Of yes, and keep some money in an account to pay the mortgage in case everything takes longer than expected. That way you don't have to try to collect money for a mortgage payment each month. The sales price may be more than the amount of the refinace which is OK--you 3 get the rest of your money at closing.
|
|
Wed Jul 12, 2006 2:40 pm |
|
|
|
