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Level 2
September 16, 2023
Question

Gift of equity

  • September 16, 2023
  • 7 replies
  • 17 views

My wife and I are buying my father-in-laws house that he lives in now. We are buying it for $145,000. We are using $40,000 gift of equity for a down payment.  The house is appraised at $215,000. Will my father-in-law have to pay any extra taxes because of the gift and for selling it for less than its worth. 

7 replies

Level 15
September 16, 2023

There is gift tax form 709 for your father in law to file but the estate tax exclusion is so high he won’t owe taxes. The gift also comes with cost basis issues for you. All is explained here. 

https://www.investopedia.com/terms/g/gift_of_equity.asp

 

Level 15
September 16, 2023

You might also want to read through the following Reg and its examples, @Dllwar:

 

https://www.law.cornell.edu/cfr/text/26/1.1015-4

DllwarAuthor
Level 2
September 17, 2023

So basically what I have gathered is that he won't be paying any extra taxes from gift or selling lower than market?