I am trying to purchase my mom's home. The market value is $500k, but want to purchase it $200k. Will I be subject to pay gift tax of $300k?

Forum|Forum|7 years ago
June 1, 2019
1 reply
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The house was originally purchased $20k a few decades ago.

Best answer by Hal_Al

No.

But your parents will have to file a gift tax return, for the $300,000 "gift of equity". "Gift Tax" is somewhat of a misnomer. Even though a gift tax return may be required, very few people ever actually pay federal gift tax. The purpose of the gift tax return is usually only to document a reduction in the allowable estate tax exemption.

See https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/The-Gift-Tax-Made-Simple/INF12127.html

Your basis, in the acquired property, for when you sell it in the future, will be $220,000 (the $200k you paid + the $20K basis in the gift). Have you parents check their records for any improvements made over the years. Those can be added to the cost basis.

Hal_AlAnswer

Employee

No.

But your parents will have to file a gift tax return, for the $300,000 "gift of equity". "Gift Tax" is somewhat of a misnomer. Even though a gift tax return may be required, very few people ever actually pay federal gift tax. The purpose of the gift tax return is usually only to document a reduction in the allowable estate tax exemption.

See https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/The-Gift-Tax-Made-Simple/INF12127.html

Your basis, in the acquired property, for when you sell it in the future, will be $220,000 (the $200k you paid + the $20K basis in the gift). Have you parents check their records for any improvements made over the years. Those can be added to the cost basis.