Title Transfer help

[rtrip]

Hi,

I'll be closing on my first house in August. My parents will pay cash for the house, but I want the title so that I can sell in a few years without a capital gains hit. My parents don't mind me having title, but they don't want to take a tax hit on selling it to me. Has anyone done this before, or know how I should structure it?

My lawyer friend was saying that it's common in Texas for one party to buy a property, and sell it to another for a nominal fee of $1 so there is no tax consiquense. My parents are hesitant to do this since they aren't sure it's ethical and they don't want to be hit by an IRS audit.

Any help is appreciated, thanks!

[TheNiche]

Hi,

I'll be closing on my first house in August. My parents will pay cash for the house, but I want the title so that I can sell in a few years without a capital gains hit. My parents don't mind me having title, but they don't want to take a tax hit on selling it to me. Has anyone done this before, or know how I should structure it?

My lawyer friend was saying that it's common in Texas for one party to buy a property, and sell it to another for a nominal fee of $1 so there is no tax consiquense. My parents are hesitant to do this since they aren't sure it's ethical and they don't want to be hit by an IRS audit.

Any help is appreciated, thanks!

Wouldn't that come back to bite you in the ass if you bought a $200,000 structure for $1 and then sold it down the line at fair market value so that $199,999 was taxable as a capital gain?

Anyway, check your contract and see if the contract to sell can be assigned to someone else. If so, it'll be incredibly simple to keep things nice and tidy. Then you can work out a loan from your parents with whatever terms are deemed "fair". In the end, if the property appreciates in value, then someone is going to have to take a hit, it seems...but you're only having to pay the capital gains taxes if there are in fact capital gains, so it shouldn't be too difficult to budget for them.

[rtrip]

Wouldn't that come back to bite you in the ass if you bought a $200,000 structure for $1 and then sold it down the line at fair market value so that $199,999 was taxable as a capital gain?

From what I understand if you own a property and it is your primary residance for two years than when you sell it you don't have to pay the captial gains for the spread, weather it is from $1 or the actual sale price.

But you are right, I want to keep it as clean as possible. I don't want to risk getting my parents into trouble. My parents are basically giving me an interest free mortage, I still have to pay them 20% down and $1500 a month. What I think I'll do is put the money into a joint savings account with my father, that way he should be able to withdraw the money tax free.

[TheNiche]

From what I understand if you own a property and it is your primary residance for two years than when you sell it you don't have to pay the captial gains for the spread, weather it is from $1 or the actual sale price.

But you are right, I want to keep it as clean as possible. I don't want to risk getting my parents into trouble. My parents are basically giving me an interest free mortage, I still have to pay them 20% down and $1500 a month. What I think I'll do is put the money into a joint savings account with my father, that way he should be able to withdraw the money tax free.

Yeah, these family business things are always tricky to work out. I try to avoid them, and yet sometimes they are still the best for everyone involved. ...by coincidence, I might just end up in an enormous amount of short-term debt to the bank-o'-grandma as of tomorrow night if something I've been planning on doesn't fall into place for me!

Anyhow, if you can arrange things by way of notes payable/receivable between family or other individuals that aren't lending institutions, it'll actually work very much to your benefit. You might even volunteer to pay a tad bit of interest (which is tax deductible for you anyway) to show your appreciation. After all, as far as credit companies are concerned after having seen your credit report and balance sheet, it is going to look to them like you own a house free and clear, and there's no way for them to know what your true cash flow situation looks like, so could very easily seek very low interest rates on other debt. It couldn't be caught (or enforced, at least) by the IRS or any other agency unless you went into bankruptcy...so be sure to keep a close eye on cash flow and to maintain a good safety net if you do go out on that limb. ...but your parents would certainly be free and clear of any liability.

[AftonAg]

Hi,

I'll be closing on my first house in August. My parents will pay cash for the house, but I want the title so that I can sell in a few years without a capital gains hit. My parents don't mind me having title, but they don't want to take a tax hit on selling it to me. Has anyone done this before, or know how I should structure it?

My lawyer friend was saying that it's common in Texas for one party to buy a property, and sell it to another for a nominal fee of $1 so there is no tax consiquense. My parents are hesitant to do this since they aren't sure it's ethical and they don't want to be hit by an IRS audit.

Any help is appreciated, thanks!

First and foremost Titles to real property in Texas are not required to list any sale amount. Typically the wording on the title is "for the sum of Ten Dollars and other consideration", or something to that effect. Register the House as your homestead and you will be protected in many ways. Regarding the Capital gains if the house is your homestead you will have a period of one (it may be two) to re-invest the capital gain in another homestead with little or no tax consequences.

You parents could also give you a tax free gift of $20,000 per year (from each parent) They could give that give in the form of equity in the house.

[musicman]

First and foremost Titles to real property in Texas are not required to list any sale amount. Typically the wording on the title is "for the sum of Ten Dollars and other consideration", or something to that effect. Register the House as your homestead and you will be protected in many ways. Regarding the Capital gains if the house is your homestead you will have a period of one (it may be two) to re-invest the capital gain in another homestead with little or no tax consequences.

You parents could also give you a tax free gift of $20,000 per year (from each parent) They could give that give in the form of equity in the house.

i drafted my own warranty deed and purchased it for "ten dollars and other valuable consideration". this also forced me to protest my taxes because the county valued that sale way higher. she had owned it since 38. but the protest was easy because the actual purchase price was not in the deed itself and the county had to take me at my word.

i did this another time as well when i purchased some unimproved property.

[rtrip]

i drafted my own warranty deed and purchased it for "ten dollars and other valuable consideration". this also forced me to protest my taxes because the county valued that sale way higher. she had owned it since 38. but the protest was easy because the actual purchase price was not in the deed itself and the county had to take me at my word.

i did this another time as well when i purchased some unimproved property.

How about instead of purchasing it, we just transfer the title through a warranty deed. That seems the simplest, but does it have any tax consequences?

[musicman]

How about instead of purchasing it, we just transfer the title through a warranty deed. That seems the simplest, but does it have any tax consequences?

that's basically what i did. I used another warranty deed that was already written to base mine on. and it had those words exactly. i'm not an accountant and wouldn't be the one to ask for tax consequences. find a good accountant and that question could be answered easily.