buying a family home

[mightynova]

My mother is giving me the family home. i need some help on how to go about it with a minimal hit buy the tax man my broker told me that my mom can gift the equity but the house is valued at around 500k. so hear is my ? in 1993 my mom wrote a contract with me and my sister for 11k per year gift trod the home that's about 150k each. The problem may be that is just a contract and she never reported the gifts on her tax's because she was giving us equity in the home not cash. now that i want to take over the home and buy my sister out were not Sheree what to do.

Is the contract good for the IRS (only sighed by mom sister and i O and a witness)

Should only have to pay tax's on the remaining 200k

[David1980]

Should only have to pay tax's on the remaining 200k

You're not taxed on the gift as a recipient, and the gift tax for the mother doesn't work like that (not exactly anyway, you'll need to take into account the lifetime gift limits to determine how much if any tax results.)

You'll need to take into consideration on this decision the gift tax for the mother, the estate tax for the mother, the capital gains tax for your sister, and your future capital gains tax when you sell.

There's quite a few variables, and a potentially very complex situation. A good place to start research would be IRS Pub. 950.

As for the contract, whether the IRS will accept it will depend as well. Is it notarized?

[LMathey]

If your mother was indeed gifting you and your sister each $11,000 of the value of the home each year then the deed to the property should reflect that. In the past when I have had this situation, we got a current appraisal and gifted the correct % each time.

Does mother have a large estate? If not, then perhaps it is an easy answer she can file a gift return and use her unified credit. It becomes more complicated when the gift is encumbered with a mortgage.

You need to sit down with someone who specializes in estate & gift taxation and figure out the best way to proceed since you also need to decide how to make your sister whole.