Expert: Dick Dennis - 9/16/2008

Question
Dick,
My parents are 80 years old. I'm one of five children and I'm in the military. Next year I retire and plan to move back to Boston area where they live. All other siblings are settled down and we all agreed that I would buy the house and let my parents live there for free or mimimal rent depending on tax rules. They want to sell the home to me for about 80% of the current market value or roughly $300K. The plan was for the four other siblings to get $50K each and my parents to get $100K profit from the sale of their home.

1. is this legal?
2. What are the tax consiquences?
3. Have you done this before in your 37 years?

Answer
Yes, this is legal, Dan. However, I strongly suggest you consult with a real estate or estate attorney to put this together for you so you do not stumble over anything the IRS would frown upon.

First of all, you should get two or three Realtors to give you an opinion of value (not an appraisal, that is done by a registered appraiser). With that opinion of value you will see that you are paying a fair price and your parents are receiving a fair amount. In real estate, business is business and family is family.

That's where the attorney comes in. You want someone to put this together so that you will not stumble over the IRS. Also you may want to create a Living Trust. This will help you skip any tax concerns. Talk to that attorney right away to make sure you have everything done right. I wish you well.

Dick Dennis       dick@dickdennis.com