Can a parent “sign over'” a house to a child without incurring any tax debt?

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Can a parent “sign over’” a house to a child without incurring any tax debt?

My parents wish to sign over a house to me without incurring a tax debt. What is the difference between signing over the house versus selling the house to me for $1. What is the minimum they can sell the house for since this is not their primary residence.

Asked on April 23, 2012 under Real Estate Law, Georgia

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

There are several types of tax debt that could be the subject of your question. For example, property taxes that are owed or will be owed concerning the house you are writing about and possibly gift tax is the home is sold to you under value.

Your parents can sell their home to you for whatever amount that they want. However for property tax assessment purposes, the county tax assessor's office will assess the property based upon its current fair market value upon transfer to you.

To avoid possible gift tax as to your parents in the transaction you have written about, the way to go about it is for you to enter into a contract to purchase the home for a reasonable fair market value. You sign a promissory note to your parents secured by a mortgage or trust deed. Each year your parents can "gift" you $13,000 each ($26,000 total) to reduce the principal owed under the promissory note tax free under IRS regulations.

To structure the above transaction I suggest that you consult with a real estate attorney with your parents to determine if the above suggestion is a plausible option for all.

 


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