Re: Paying off my parents mortgage?
Currently the estate tax exemption is $2m and is increasing. I would recommend you gift $12,000 (the amount went up) before 12/31 and again soon after. The remaining balance can be paid off in 2008. This way you avoid filing a gift tax return.
DO NOT buy the house from them. When they pass away you (or whoever inherits the property) will get a stepped up basis on the property. This means that your basis for capital gains will be the market value when they pass away instead of their purchase price. If you buy it from them you will not get this step-up in basis unless you pay them full value for the house.
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