Gift money help please

[Elke Mariotti]

Originally Posted by Sabinerose

We did this... almost exactly. Our downpayment on our home was borrowed from my parents. They signed a document stating that it was a gift to satisfy the mortgage company (because, of course, downpayments can't be borrowed). When we got the proceeds from our other house that we sold, we paid them back in one lump sum.

No one cares...truthfully. The amount you are talking about is so low (in the grand scheme of things) that they do not check up on it. The issue you will have is when it comes time to do your taxes. All the proceeds from the sale of your house will be a wash because you reinvested in real estate within a certain time from EXCEPT the amount you returned to your parents. That will be counted as part of your income. You may want to adjust your withholdings now to compensate for that.

Per chance, are you confusing this with an old tax law?

[Cmm1]

Thanks Sabinerose. I am think i am making more of this than I should. It almost seems to me the gift letter states I could NEVER give another penny to my parents or they would consider that a loan! Once again my parent are giving me the money.

[SmartMoney]

Originally Posted by Cmm1

Thanks Sabinerose. I am think i am making more of this than I should. It almost seems to me the gift letter states I could NEVER give another penny to my parents or they would consider that a loan! Once again my parent are giving me the money.

The only reason they want that Gift Letter is to protect their collateral. Should mommy and daddy place a 52K second trust lien on the collateral property, then it's a case of fraud when that lien is found at the time of foreclosure or short sale. Some of the guidelines (VA & FHA) even have provisions for family loans. I would estimate 90% of all gifts are monies the children (or other blood relative) receive are actually funds the recipient is later compelled to return at some time. Some return the funds within the first year, while many wait until the property is sold several years later.

Find something else to lose sleep over. This is not a problem. Truly.

[Cmm1]

Thanks Smart Money! I find this comforting!