@TomD8 wrote:
@curiousminds wrote: "30k is being gifted except that it just becomes the down payment on 200k."
Except that's not what's happening. Seller is not giving $30K cash to the buyer; instead seller is letting buyer buy his home at a $30K discount from FMV. The IRS treats that $30K discount as a gift and requires a gift tax return if the amount exceeds the filing threshold..
On the other hand if seller gives $30K cash to buyer - which in effect is @curiousminds 's scenario - and buyer then turns around and uses the $30K to buy seller's house at full FMV, where is the gift? Seller has given away $30K, but has gotten the $30K right back because buyer used the money to buy seller's house. That is not a gift.
Hmm not exactly. The seller could have had anyone buy his house at FMV without giving them $30K, so how do you not see the gift, just because the buyer chose to use it to buy something the seller had?
