Father builds daughter a house and gives it to her at
My question is: US-specific QUESTION: Built the daughter a house, cost us 170K. They get loan for 160K, at closing we agree to say house cost 200K so there is no down payment. 40K is "gift of equity" and it shows that on 1099S but also says sale price is 200K. We paid closing costs, walked away with 154k. Had the lot/house for less than 6mo. Built in spare time with some help, we are teachers (read POOR) so hope not to have to pay capital gains on this transaction? --------------------------------------------------------------------------- david ingram replies: As I see it, there was a constructive trust involved and you built a house for $170,000 and sold it to your daughter and her husband for $156,000. Your gift was $16,000 which is not subject to gift tax. The rest of the paperwork was window dressing. I am assuming that daughter and husband assisted with some of the building and painting and landscaping and fetch and carry stuff. Not Taxable for gift tax or income tax. The sweat equity on all your parts stayed in the family. The necessity to build it in your name to start with was because your daughter and her husband did not qualify for the mortgage. This would be a good question to ask or follow up with on SIRIUS Radio. I will be on with free questions and answers at 10 AM Vancouver/Los Angeles Time, 1 PM New York / Toronto time. Find out how as follows: listen to David Ingram (and ask a question if you want to) Thursdays on Channel 114 Sirius Radio The Good Life with Jesse Dylan Daily at 12 noon New York time - david Ingram International Income Tax expert - real estate IRA's 401(K) Thursday Jan 5, 2006 will be at 10 AM Vancouver time, 1 PM Manhattan time. You can listen live on Channel 114 of your Satellite Radio or listen to the stream on www.lime.com. You have to have the latest version of Real Player to listen live on the Internet. You can get the latest version free by going to http://www.real.com/playerplus/index.html?src=downloadr After you are up to date, you can listen to the live program by clicking on: http://lime.com/more/Radio_Play/index.html If you are in Canada and have a question to ask and want to email it to me in advance, we will try and use it on the air and if not, I will make a real effort to answer it by email. But better would be a phone call if you live in the USA. Yep, a live free phone call is available from anywhere in The United States (not Canada yet) at 1-866-LIME-114 or 1-866-546-3114 Now, I do not have to tell you that if you want this service available in the future, support now would be nice. Help me show there Manhattan types that there is a real demand for a Canadian to be answering US tax questions with particular emphasis on those Cross-Border or out of country questions. Thousands of tax consultants can answer a child tax credit but not many can deal with foreign tax credits and earned income exemptions and a foreign vacation home or foreign bank accounts or that foreign pension you still have after working in Australia, or Algeria or Spain or Canada. ============================== David Ingram's US/Canada Services US / Canada / Mexico tax, Immigration and working Visa Specialists US / Canada Real Estate Specialists Home office at: 4466 Prospect Road North Vancouver, BC, CANADA, V7N 3L7 Cell (604) 657-8451 - (604) 980-0321 Fax (604) 980-0325 Calls welcomed from 10 AM to 10 PM 7 days a week (please do not fax or phone outside of those hours as this is a home office) email to taxman at centa.com <mailto:taxman at centa.com> www.centa.com <http://www.centa.com/> www.david-ingram.com <http://www.david-ingram.com/> Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. 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