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SFace
@
2010 Nov 8, 7:27am
Appears none. This is not a gift. The free interest is a gift, however, it would be under the 11K or so threshold before it is subject to gift tax. Document that the cash is a loan and will be repaid.
Yeah that's what I was thinking too. But I've been reading and there may be 2 alternatives.
-I can pay them interest on the $145k loan to avoid taxes. But they'd have to claim the interest earned as income. I really want to avoid this route since it most likely will trouble them when they do their taxes.
-I can get gifts from each aunt and uncle under the legal limit for gifting. Not too sure how this works.
I definitely will consult a CPA/tax advisor but would like some input so I can have items to discuss with the CPA.
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We just wrote a $425k cash offer on a home. The property requires all cash due to it missing necessities; the previous owner gutted it prior to foreclosure.
I've got $280k to my name and all my aunts and uncles have all chipped in to loan me the other $145k. Once I purchase the property, I will replace all the necessities and make it habitable. I will then take out a $200k loan against the property to repay my aunts and uncles, and have a bit of pocket cash.
Does anyone know about the tax consequences of the $145k cash loan? What's the best approach for this scenario to avoid/minimize taxes? I expect to repay the full amount with a cash-out refinance within 3 months.
#housing