Expert: Dick Dennis - 2/10/2007

Question
My father lost his job and money is tight for them now. My parents asked me to buy their house for a low amount and then let them live rent free and pax taxes. They want to transfer the deed over to me reguardless of me paying them and cash..

They currently owe 25,000 on the mortage (which I would pay off)   Maybe give them an extra 20,000.  My parents are 59 and 57, the property is worth about 160,000... The house is torn up due to unfinished remodleing....

My husband and I are finacially good. What would be the pro's and con's of us helping them out and this being an investment for us? What are the pro's and con's of them trans. the deed over to my name without any money being exchanged?

Thank you for your time!

Answer
You may be asking for trouble from the IRS, Kay. Why? The IRS frowns on in-family low-price purchases. Further, your basis would be as low as their's was. That would make it difficult for you when you resell the property some time in the future. You are much better off to actually buy the property from them, as an investment, and give them, say, $40,000 as down payment and have them carry back a mortgage that you would pay on for a time that is to be decided. You actually pay on that mortgage, giving them some money each month. Or they can forgive the mortgage because they are permitted to give away $12,000 each year to each of you from each of them. That means they can forgive $48,000 this year, and then $48,000 next year and so on. I strongly suggest you consult with a local tax attorney or CPA to make sure this is done right for you and your parents.

I do wish you well.

Dick Dennis