I plan to take over my parents house by paying the remaining mortgage. They bought this house for $100,000. This was their primary house and will be our primary house.
FMV $550,000
remaining mortgage $350,000
gift of equity $200,000
Questions:
1. There will be no capital gain for my parents as this is their primary house, correct?
2. What is the cost basis for me when I sell this house, $550,000 or $350,000?
3. If my parents still live in the house with us after the transfer without paying rent, is that going to be an IRS issue/red flag?
4. What is difference between the above setup and purchasing this house for $350,000 without gift of equity?
Thanks for your help.
