Tax Law (Questions About Taxes)/gifts of equity


Hi John, I see you've answered a few questions about gifts of equity.  But I'm still a little confused on my particular "problem."  My father is going to sell his house to me for what his mortgage is on it, we don't know the taxable value exactly but I believe it's around $150,000.  Let's pretend that's correct for the sake of the question.  My credit union mortgage rep advised me to buy the house as a gift of equity for $65,000, which is more than my dad was asking, so that I could put down a 20% payment.  Now that I'm reading into this, I'm seeing the advantage, but what does that mean for taxes for both my dad and myself?  I know he can gift me (and yes it's only me) $15k, but would he then be responsible for paying taxes on the extra $70k above the ($65k + $15k=$80k).  Also, my step-mom is not on the title, but could she still claim a gift to me of the $15k for this?
Thanks for any help you can provide.


Thanks for your question.

If he sells the house to you for less than the fair market value, the additional amount is considered a gift. Your father is allowed to give you $14,000 per year as his annual exclusion amount. in addition, he may elect gift-splitting and his wife can be treated as giving you $14,000. If this is done, a gift tax return Form 709 must be filed, even though no tax is due.

If the $28,000 doesn't cover the gift your father has a $5,000,000 lifetime exclusion. So he files a Form 709 and use up some of his exclusion. Again, no tax.

Your basis in the house will be a combination of his cost basis plus what you pay him for it. This portion is rather complex and not suitable for discussion in this volunteer forum.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA


I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at I also offer seminars and consultations to churches and clergy on their tax issues at Also visit my blog, I am listed on Tax Connections at Prepare and file your own taxes at


I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

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