Selling your home to a related party?
Most transfers of property or property interests without adequate consideration are treated as gifts. This includes below-market sales of homes, which often occur when selling to a related party.
The difference between the fair market value and the sale price is considered a gift. This gift is deemed to occur before the sale, and the gifted portion of the property retains its original basis. A gift tax return may need to be filed.
For the seller, the sale of the home may trigger capital gains tax. The seller will report a gain if the sales price exceeds the property’s adjusted basis (adjusted to reflect the gifted portion). It’s important to note that state income tax filings may also be required.
For more information on this topic, contact a ShindelRock tax professional today.