Buying Home For Sibling
REM #A725
By Ilyce R. Glink
Summary: A reader bought a home for her sister when she was going through a divorce. The reader would now like to sell the home to her sister. Ilyce explains the tax implications and why a real estate attorney is needed.
Q: My sister was getting a divorce and between jobs so was not in a position
to purchase a home in the city where she was relocating to. To help her out,
I secured a mortgage and purchased the home, which cost $155,000.
My sister provided the down payment of $55,000 and makes the monthly mortgage payment (which includes insurance and taxes).
I'd like to sell the house to my sister now that she has a job and her divorce is final. Assuming she won't have any problems securing a mortgage on her own, what are the tax implications when I do sell the property to her? I’m not particularly concerned about realizing a profit or a loss on the sale for tax purposes. Any guidance would be appreciated.
A: It’s clear that you and your sister have a great deal of trust between you – she put down $55,000 on the property but wasn’t listed on title or on the mortgage. That’s nice to see. I’m sure you’ve been a big support to her as she’s dealt with this upheaval in her life.
The good news is you should be able to sell her the house for what you paid plus costs, such as any title or transfer taxes required.
Since you won’t show a profit on the home, you shouldn’t have any
tax issues. Please hire a real estate attorney to help with the paperwork and
guide you through the process of “selling” your sister her home.
NOTE: This column is distributed by Real Estate Matters Syndicate, PO Box 366, Glencoe, Illinois, 60022. This column may not be resold, reprinted, resyndicated or redistributed without written permission from the publisher.
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