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If someone else buys you a house(taxes???)

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If someone else buys you a house(taxes???)

Old 08-31-10, 12:59 PM
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If someone else buys you a house(taxes???)

How does the tax situation work if the house is a gift and lets say its worth 25 grand. If someone gave you 10 grand as a gift on Dec. 31st and another 10 grand as a gift on Jan. 1st but you still would need 5 grand more-would the 5 grand be taxable because it wasn't a gift? Not sure on the tax laws. Another thing-what happens if you are only part owner of the house-whats the tax situation at purchase.
Old 08-31-10, 01:00 PM
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Re: If someone else buys you a house(taxes???)

Kitty may say it's a gift, but she really means for you to buy it.
Old 08-31-10, 01:41 PM
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Re: If someone else buys you a house(taxes???)

Originally Posted by dvd-4-life View Post
How does the tax situation work if the house is a gift and lets say its worth 25 grand. If someone gave you 10 grand as a gift on Dec. 31st and another 10 grand as a gift on Jan. 1st but you still would need 5 grand more-would the 5 grand be taxable because it wasn't a gift? Not sure on the tax laws. Another thing-what happens if you are only part owner of the house-whats the tax situation at purchase.
You may need to consult an attorney. However, my understanding is that a gift is never taxable to the recipient, but may be taxable to the giver. There is a gift tax exemption which is currently $13000/year. A giver may give this amount to as many recipients as he wishes, but only once per recipient per year. Using everybody's exemption, a couple could give $52000 (4x) to another couple.

If any individual gifts exceed the annual exemption, they count against a total deduction for gifts and estate taxes. For gifts, the total deduction is $1 million, for estate taxes it is more but in a state of flux. You need to keep records, but I believe there is no tax paid until this amount is used up. BUT it is complex and you undoubtedly need an attorney.
Old 08-31-10, 01:49 PM
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Re: If someone else buys you a house(taxes???)

What a house worth $25K may look like:

Old 08-31-10, 02:35 PM
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Re: If someone else buys you a house(taxes???)

They should buy the house and quit claim it to you. If it then becomes your principal residence, unless you then turn a profit of >$250,000, you won't owe tax on the sale of it.
Old 09-01-10, 08:55 AM
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Re: If someone else buys you a house(taxes???)

When poor people get a free house on that Extreme Home Makeover show, don't they then owe a shit ton in property taxes?
Old 09-01-10, 10:31 AM
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Re: If someone else buys you a house(taxes???)

Originally Posted by ben12 View Post
When poor people get a free house on that Extreme Home Makeover show, don't they then owe a shit ton in property taxes?
Yes, they would owe property taxes on an ongoing basis.

Worse, they almost certainly owe income tax on the "prize" of a house. The IRS does look into whether it is a bona fide gift, or whether it is "pay" for something. (like being on the show, having their story told).

If they are poor and down on their luck, and get a big fancy house, that probably throws them up a few tax brackets. I would expect that they have to mortgage the house to pay the income tax. Then they have to make enough to pay off mortgage, insurance, and property tax. Many of them get too much house and can't keep up.

Edit: Always look a gift horse in the mouth and think about the tax implications.
Old 09-01-10, 10:34 AM
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Re: If someone else buys you a house(taxes???)

Originally Posted by OldDude View Post
Yes, they would owe property taxes on an ongoing basis.

Worse, they almost certainly owe income tax on the "prize" of a house. The IRS does look into whether it is a bona fide gift, or whether it is "pay" for something. (like being on the show, having their story told).

If they are poor and down on their luck, and get a big fancy house, that probably throws them up a few tax brackets. I would expect that they have to mortgage the house to pay the income tax. Then they have to make enough to pay off mortgage, insurance, and property tax. Many of them get too much house and can't keep up.
The families on Extreme Makeover : Home Edition have to pay the extra property taxes, but they don't pay any income taxes on the "prize" of a house. ABC uses a bit of a technical loophole in the tax rules. They're not giving the family a house. The family "rents" the house for a week to the production company for filming. Once they do that, the production company is allowed to make "improvements" for the purpose of filming, tax free.

Some families on the show have been foreclosed on, but that's because they mortgaged their house to take cash out, after the fact.
Old 09-01-10, 10:57 AM
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Re: If someone else buys you a house(taxes???)

Someone has to pay the property tax. The city isn't going to care who, but someone does have to pay it. And in most areas it is not based on purchase price or if it was gift. Most cities regularly appraise houses at least virtually. You can dispute the tax amount. For example if the tax is based on $300,000 but it was for sale for $250,000 for 6 months, you might have a good case. Or if no house sound for that amount in your area and you had to pay that because you bought it furnished for example, maybe you got a case.

Interestingly in my city, cars are treated differently. My dad gave my daughter a car. I went to get it tagged registered and when they asked the purchase price and I said it was a gift, they charged me very little. Much less than the car is worth.
Old 09-01-10, 11:07 AM
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Re: If someone else buys you a house(taxes???)

Originally Posted by OldDude View Post
Worse, they almost certainly owe income tax on the "prize" of a house. The IRS does look into whether it is a bona fide gift, or whether it is "pay" for something. (like being on the show, having their story told).

If they are poor and down on their luck, and get a big fancy house, that probably throws them up a few tax brackets. I would expect that they have to mortgage the house to pay the income tax. Then they have to make enough to pay off mortgage, insurance, and property tax. Many of them get too much house and can't keep up.

Edit: Always look a gift horse in the mouth and think about the tax implications.
Yeah, there are frequent raffles of couple million dollar homes around here. I haven't seen a case of any winner taking the home due to having to sell it to pay the taxes. They just take a cash equivalent (which is several hundred thousand less than the stated "value" of the home.) I've seen the same home going up for raffle for several years now.
Old 09-01-10, 02:08 PM
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Re: If someone else buys you a house(taxes???)

Originally Posted by wildcatlh View Post
The families on Extreme Makeover : Home Edition have to pay the extra property taxes, but they don't pay any income taxes on the "prize" of a house. ABC uses a bit of a technical loophole in the tax rules. They're not giving the family a house. The family "rents" the house for a week to the production company for filming. Once they do that, the production company is allowed to make "improvements" for the purpose of filming, tax free.

Some families on the show have been foreclosed on, but that's because they mortgaged their house to take cash out, after the fact.
Wow. Do they have a written private opinion from the IRS accepting that position? i can see that coming back to bite everybody in the ass.
Old 09-01-10, 03:30 PM
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Re: If someone else buys you a house(taxes???)

Originally Posted by Sdallnct View Post
Interestingly in my city, cars are treated differently. My dad gave my daughter a car. I went to get it tagged registered and when they asked the purchase price and I said it was a gift, they charged me very little. Much less than the car is worth.
In MD, a vehicle gifted to direct family members is treated differently than if you gifted to a non-family member. If non-family have to pay a minimum sales tax and a notarized statement of why the car was 'sold' below book value.

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