"My husband lost his job last summer right before we closed on the home that we spent the last year building."
So by "last summer" you are referring to 2018? Clarity is required here, as if you're filing a tax return for "this year" we know you mean the 2018 tax year. So does "this last summer" refer to 2018 also?
"In order for us to get the home and not lose out on our construction deposit, his parents generously bought the home for us using their cash AND our cash that we would have used for our downpayment (purchase price = $533,000, our contribution $100,000, their contribution = $433,000)."
Whose names are presently on the deed? Whose names are presently on the current mortgage?
"The lender is telling us that we can buy the home from them for $433,000 and then the equity (basically our $100,000 plus the bit that it has appreciated) will need to be gifted us as our downpayment."
I'm not following you here. How can your parents "gift" money that was yours already, at the time they purchased it? But then, we really need clarity on the above.
" My question's are #1 - do we need to record giving/loaning them that money that would have been our downpayment?"
First, if you loaned them money and "your" names are not on the deed, that would require you to be able to produce loan documents and they would have to pay back that loan to you with interest. Even if you don't charge interest, when dealing with a loan on your tax return, there will be "imputed interest" which can and will make things more complicated than they probably need to be.
"#2 - When they do their taxes and report the purchase of a home and then the selling of that home 6 months later, what are the repercussions?"
Again, assuming your names are not on the deed, from their perspective (and as far as the IRS is concerned) since they would have owned it less than a year, it's considered an investment. So it won't be reported as the sale of a home per-se. It will be reported as the sale of investment property. Then, since they "held" that investment for less than a year they will pay the higher short term capital gains tax if they sell it to you for a gain. Looks to me like they will be selling it to you at a loss though, if "they" (and only your parents) purchased it for $533K. (where that money came from is irrelevant really, if they are the only owners listed on the deed and the only ones named on the mortgage.)
" #3 - We'd like to avoid them needing to report the gift of equity and having it come from their lifetime allowance. Can they "gift" the money to my husband, myself and my 4 children to avoid reporting this?"
If you want to go that route, so long as they don't gift more than $15K to any one individual in any one tax year, there is no reporting requirement by either the giver or the recipient. They also don't have to gift the entire amount in a single tax year either. $100K split among six people is $16,666 per person. Ask them to deposit $10K into a 529 plan, Coverdell, or other type of education account for the kids, and then the "gift" will be $90K which split six ways comes out to exactly $15K per person. Of course, they can't deposit it to an account for "your" kids, as that would put them over the $15K threshold. But then, the administrator of a 529 can always change the beneficiary student of that plan, at any time they choose. 🙂
Now I'm no expert on this stuff, but overall I think it would be best to treat the $100K you provided, as a loan that was "paid in full" at the time you purchase the house from them. Then you will only be paying tax on "imputed interest" since no money will "actually" be changing hands in the form of cold cash, from your parents to you. I say this, because "gifting" $100K across 6 people "will" raise eyebrows, but only *if* the IRS were to find out about it. Fat chance of that though, unless you have an enemy determined to make your lives as miserable as they can.
