Selling your home to a related party?
Most transfers of property, or property interest without adequate consideration are deemed a gift. This would include a below-market sale of a home, which frequently happens when selling to a related party. The difference between the fair market value and the sale price is viewed as a gift. The gift will be considered to have happened prior to the sale and the gifted portion of the property will retain its original basis. A gift tax return may be required.
In terms of the seller, the sale of the home may be subject to capital gains. The seller will report a gain on the sale of the home, if the sales price is greater than the property’s adjusted basis (which will be decreased by gifted portion). Be aware that a state income tax return may also be required.
For more information on this topic, contact a ShindelRock tax professional today.