Paying off my parents mortgage?

[xxThe_Lebowskixx]

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Didn't we do this a year ago?

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Sure enough....

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conclusion in that thread was to just make payments. that is why i remade this thread because i want to pay it off for reason stated.

[By-Tor]

Smart people, humor me for a minute...

Why is it considered a gift if a person simply makes a payment, in this case 'in full', for another person?

He is not technically giving someone a gift that they then decide to make a payment with. He is making a payment on someone elses account at an institution.

Why is this a tax issue?

Is this for the sole purpose of KKF being able to write the dollars off of his income taxes? Or is it for his parents to avoid claiming the money as income?

[NicksDad1970]

However u do it it's a heck of a nice thing to do.

[RunDownHouse]

By-Tor,

For the same reason you can't just buy a brand new car and then give it to a college athlete, nor can you pay Reggie Bush's rent or car payments or anything. Those things all have significant monetary value, and that value is being transferred from one party (you) to another (them).

[xwillience]

What about buying out the mortgage from the bank? and then gifting the house to them bit by bit? I dont know if or how this would work though.

[RunDownHouse]

No idea if you could buy the loan and then just forgive $11k worth of payments a year, or something like that. That's why its worth a couple hundred bucks to talk to a lawyer for a few hours. They're informed, we're not.

[mmcd]

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The house is only worth $150K right now if they sold it. I think there is $35Kish left on the mortgage.

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Same thing I told you last time...11k to each of your parents on 12/31 and on 1/1. Unless your parents have a ton of money, there will be no Federal Estate taxes when they die.

[matt777]

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.

[Obfuscation]

I don't have anything constructive to add but I wanted to post to just tell you that you rock.

Much props and respect for the kindness to the parentals.

Serious up.

[dcb777]

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The house is only worth $150K right now if they sold it. I think there is $35Kish left on the mortgage.

This is absolutely correct advice that you should follow.