Selling a house for much lower than market value?

[mugs]

Originally posted by: dullard
As for the house, I believe you might be subjected to the gift tax laws. But I'm no tax expert. Try the tax thread. as there are experts in there.

Originally posted by: CTrain
Actually you are INCORRECT....This is in Florida.

Actually, arguing over something that is different in every state and calling that person with different tax laws "incorrect" is stupid.

Laws vary from state to state. Thus what he said may very well be correct for his state. In my state, NE, for cars there are two taxes. (1) Sales tax. The sales tax, even for used cars there is sales tax, is charged in the location where the buyer lives. If the buyer buys an expensive car for very little, then the sales tax is very little. I've done this multiple times with my family, selling cars back and forth for little to no money. (2) Property tax. Property tax is charged each year to get the license plates. Property tax is based on the AVERAGE selling price for a vehicle of that make, model, and year. Thus, the property tax does NOT change with the price that you bought/sold the car.

So, in NE, if you buy a mint condition car worth $10,000 for $1, you pay sales tax on $1 and property tax on ~$8000 because the average car is not in mint condition.

Likewise if you buy that same car but it has been damaged severely so it is only worth $5000 and pay only $1, you pay sales tax on $1 and property tax on ~$8000.

Well, both CTrain and the guy he quoted said they were in Florida.

Anyway, I'm 90% sure that would be considered a gift and would be subject to gift tax. (The difference in value of the house that is)

However, there is a lifetime threshold of gifts that you have to hit before you actually have to pay ANY gift taxes. http://www.irs.gov/publications/p950/ar02.html#d0e305

Also from that page:

The gift tax applies to the transfer by gift of any property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.

Long story short -
The gifter will likely NOT owe any gift taxes due to the lifetime exclusion, but this gift will knock out a large portion of the lifetime exclusion which is something to consider if the person intends to make any more large gifts like this.

 

[mugs]

Originally posted by: bacon333
Here's more detail on the transaction:

1. State of transaction: California
2. According to Zillow the apartment complex is worth $1 million.
3. Person A and Person B are relatives.
4. Gifting is not an option.

Person A lost her job and just needs to sell off the apartment. She chooses to sell it to person B, who has been living in the apartment for over 7 years.

Is there some kind of "stress sale" that would make this possible?

Also, when you go to zillow.com to get an estimate on a apartment complex, how accurate are those values? I heard that the market value could actually be more than $200k lower than what is represented there.

I will speak to a tax professional soon regarding this issue but it wouldn't hurt to hear from your experiences.

Person A lost their job so they want to take a $800k loss on their property? That makes no sense. Even if they have to sell quickly, they could get way more than that if the property is worth anywhere near what Zillow says. I wouldn't trust Zillow, but it's not going to be off by $800k.

 

[brandonb]

Something sort of similar happened to me. I was living in a place, and bought it cheap ($120k) and later on I found a great house that I wanted to upgrade to ($270k)... So just to get things moving I decided to sell my original $120k house to a friend, for $139k... (I owed $100k on it) when the market value was $170-200k. So basically I sold it for $30k under market value.

Nothing happened, but the city did call him and ask him how he got a cheap price. When doing property taxes they exclude houses sold under market value if the buyer knew the seller and got a good deal.

Thats the only thing that happened in my experience.

 

[CTrain]

Originally posted by: BUTCH1

Originally posted by: CTrain

Originally posted by: BUTCH1
No matter what amount you sell it for the county or city tax appraiser will tax
the new owner on the actual appraised value, not the sale price. If I sold my 2005
auto to my neighbor for $100 you can bet the DMV will charge him sales tax (FL)
on the blue book value of the car NOT the fact he only paid $100 for it.......

Actually you are INCORRECT.
I bought 2 cars in 2006 and the same exact thing happenned.

I bought a car from a friend of mine.
I got the title and registered it as a $500 purchase. Book value $4500.
A month later, they sent me a letter asking me to verify the price or else I would have to pay the penalty.

Theres 3 ways to verify the price:

1) Have both the seller and purchaser fill out the form they sent me stating the price of the car. Easiest way.
2) A copy of the bill of sale notarized
3) If you can't contact the seller, you need to fill out the form and state the condition of the car.

I registered a second also way under book value and a month later, they sent me the same letter.
Both times I use the option #1 and that was it.
This is in Florida.

How it's done may vary county to county, I live in voulsia and they use the " by the book" value, I know a few people who tried to use bill of sale but said it didn't work.
I'll have to look it up to see if it's statel law or varies by county.

This is simply not true.
This is the Florida Motor Vehicle Department.
Its the same for every county.

 

[CTrain]

Originally posted by: dullard
As for the house, I believe you might be subjected to the gift tax laws. But I'm no tax expert. Try the tax thread. as there are experts in there.

Originally posted by: CTrain
Actually you are INCORRECT....This is in Florida.

Actually, arguing over something that is different in every state and calling that person with different tax laws "incorrect" is stupid.

Laws vary from state to state. Thus what he said may very well be correct for his state. In my state, NE, for cars there are two taxes. (1) Sales tax. The sales tax, even for used cars there is sales tax, is charged in the location where the buyer lives. If the buyer buys an expensive car for very little, then the sales tax is very little. I've done this multiple times with my family, selling cars back and forth for little to no money. (2) Property tax. Property tax is charged each year to get the license plates. Property tax is based on the AVERAGE selling price for a vehicle of that make, model, and year. Thus, the property tax does NOT change with the price that you bought/sold the car.

So, in NE, if you buy a mint condition car worth $10,000 for $1, you pay sales tax on $1 and property tax on ~$8000 because the average car is not in mint condition.

Likewise if you buy that same car but it has been damaged severely so it is only worth $5000 and pay only $1, you pay sales tax on $1 and property tax on ~$8000.

Did you not see that he stated FLORIDA ??
And I replied because I am in the state of FLORIDA.
Its the Florida Motor Vehicle Department.
Its the same regulation for the whole state of Florida.
I still have the copy of the letter they sent me.
Its from the Florida Department of Revenue
Want me to upload it so you all can see it ??

 

[RbSX]

Originally posted by: bacon333
Here's more detail on the transaction:

1. State of transaction: California
2. According to Zillow the apartment complex is worth $1 million.
3. Person A and Person B are relatives.
4. Gifting is not an option.

Person A lost her job and just needs to sell off the apartment. She chooses to sell it to person B, who has been living in the apartment for over 7 years.

Is there some kind of "stress sale" that would make this possible?

Also, when you go to zillow.com to get an estimate on a apartment complex, how accurate are those values? I heard that the market value could actually be more than $200k lower than what is represented there.

I will speak to a tax professional soon regarding this issue but it wouldn't hurt to hear from your experiences.

Seems kind of silly, the person that lost their job should just sell it at market value, it would make her life alot easier to have another 800 grand in the bank.

 

[Vic]

Originally posted by: bacon333
Here's more detail on the transaction:

1. State of transaction: California
2. According to Zillow the apartment complex is worth $1 million.
3. Person A and Person B are relatives.
4. Gifting is not an option.

Person A lost her job and just needs to sell off the apartment. She chooses to sell it to person B, who has been living in the apartment for over 7 years.

Is there some kind of "stress sale" that would make this possible?

Also, when you go to zillow.com to get an estimate on a apartment complex, how accurate are those values? I heard that the market value could actually be more than $200k lower than what is represented there.

I will speak to a tax professional soon regarding this issue but it wouldn't hurt to hear from your experiences.

1. I don't understand why Florida keeps coming up.
2. Zillow is for estimation purposes only and not to be taken as actual market value. If that needs to be determined, then a professional RE appraisal will need to be performed. You say "apartment complex," which I interpret to mean more than 4 units. That would make this income-producing property, i.e. a lot more than just property taxes will be at issue.
3. Which is typical for non-arms length transactions.
4. Which I assume means that financing will be required for the transaction.

Long story short, get professionals on the job. There are very few AT'ers who will have experience in this type of issue or will be qualified to help you.

 

[Fern]

Originally posted by: bacon333
Here's more detail on the transaction:

1. State of transaction: California
2. According to Zillow the apartment complex is worth $1 million.
3. Person A and Person B are relatives.
4. Gifting is not an option.

Person A lost her job and just needs to sell off the apartment. She chooses to sell it to person B, who has been living in the apartment for over 7 years.

Is there some kind of "stress sale" that would make this possible?

Also, when you go to zillow.com to get an estimate on a apartment complex, how accurate are those values? I heard that the market value could actually be more than $200k lower than what is represented there.

I will speak to a tax professional soon regarding this issue but it wouldn't hurt to hear from your experiences.

I'm a tax CPA.

No evasion of taxes unless the extra $800k is some how transfered to the seller and not reported.

Because persons A & B are related, there is a very good likelyhood that the $800k (or whatever amount is below actual FMV) will be viewed by the IRS as a "taxable" gift. Whether or not there will be any federal gift taxes due on such gift depends upon the amount of any unified credit remaining. Better check CA gift law for any state gift tax consequences.

As far as a "stress sale", would the seller be willing to sell the property to someone other than that relative for the $200k? If not, forget it.

Fern

 

[CTrain]

Originally posted by: Vic

Originally posted by: bacon333
Here's more detail on the transaction:

1. State of transaction: California
2. According to Zillow the apartment complex is worth $1 million.
3. Person A and Person B are relatives.
4. Gifting is not an option.

Person A lost her job and just needs to sell off the apartment. She chooses to sell it to person B, who has been living in the apartment for over 7 years.

Is there some kind of "stress sale" that would make this possible?

Also, when you go to zillow.com to get an estimate on a apartment complex, how accurate are those values? I heard that the market value could actually be more than $200k lower than what is represented there.

I will speak to a tax professional soon regarding this issue but it wouldn't hurt to hear from your experiences.

1. I don't understand why Florida keeps coming up.
2. Zillow is for estimation purposes only and not to be taken as actual market value. If that needs to be determined, then a professional RE appraisal will need to be performed. You say "apartment complex," which I interpret to mean more than 4 units. That would make this income-producing property, i.e. a lot more than just property taxes will be at issue.
3. Which is typical for non-arms length transactions.
4. Which I assume means that financing will be required for the transaction.

Long story short, get professionals on the job. There are very few AT'ers who will have experience in this type of issue or will be qualified to help you.

No, I was mentioning Florida about the post about CARS selling for under value.

 

[dullard]

Originally posted by: CTrain
Did you not see that he stated FLORIDA ??
And I replied because I am in the state of FLORIDA.
Its the Florida Motor Vehicle Department.
Its the same regulation for the whole state of Florida.
I still have the copy of the letter they sent me.
Its from the Florida Department of Revenue
Want me to upload it so you all can see it ??

Um, the OP is from CALIFORNIA. This is a thread about the OP, not about you or other posters.

Information about Florida is of some value. But don't go around posting that something is incorrect when it only applies to Florida.

 

[OutHouse]

Originally posted by: BUTCH1
No matter what amount you sell it for the county or city tax appraiser will tax
the new owner on the actual appraised value, not the sale price. If I sold my 2005
auto to my neighbor for $100 you can bet the DMV will charge him sales tax (FL)
on the blue book value of the car NOT the fact he only paid $100 for it.......

umm wrong. they go off the bill of sale. thats why when you sell your car many people ask that the seller write the BOS lower than what they are actually buying the car for.

 

[Tom]

two kinds of taxes involved.

1. property taxes. based on appraisal, not sale value, so shouldn't be affected.

2. capital gains tax. I don't see why there would be a problem, you wouldn't really be avoiding paying it, just delaying it to some future sale at market value. and there's a big one-time exemption for homes anyway i think. But a tax adviser might be able to figure out the best way to do the transaction to maximize the tax benefits for both parties.

btw, i know nothing about real estate or taxes.

 

[r6ashih]

Originally posted by: Tom
two kinds of taxes involved.

1. property taxes. based on appraisal, not sale value, so shouldn't be affected.

2. capital gains tax. I don't see why there would be a problem, you wouldn't really be avoiding paying it, just delaying it to some future sale at market value. and there's a big one-time exemption for homes anyway i think. But a tax adviser might be able to figure out the best way to do the transaction to maximize the tax benefits for both parties.

btw, i know nothing about real estate or taxes.

property tax is based on sale value, not appraisal value.

 

[CTrain]

Originally posted by: dullard

Originally posted by: CTrain
Did you not see that he stated FLORIDA ??
And I replied because I am in the state of FLORIDA.
Its the Florida Motor Vehicle Department.
Its the same regulation for the whole state of Florida.
I still have the copy of the letter they sent me.
Its from the Florida Department of Revenue
Want me to upload it so you all can see it ??

Um, the OP is from CALIFORNIA. This is a thread about the OP, not about you or other posters.

Information about Florida is of some value. But don't go around posting that something is incorrect when it only applies to Florida.

Damm, you're about as dumb as they come.

If you read the thread in chronological order, you will see that the BUTCH1 guy jumped in with stuff about cars and crap.
I quoted him and tried to correct the mistake.

I didn't intinially started ranting about cars and Florida.
In fact after, I quoted the guy about cars and Florida, I actually added my own actual purchase of a house under value.
Yeah, I actually stated a real case...imagine that.

Maybe you need to read more carefully.

 

[dullard]

Originally posted by: CTrain
Damm, you're about as dumb as they come.

If you read the thread in chronological order, you will see that the BUTCH1 guy jumped in with stuff about cars and crap.
I quoted him and tried to correct the mistake.

I didn't intinially started ranting about cars and Florida.
In fact after, I quoted the guy about cars and Florida, I actually added my own actual purchase of a house under value.
Yeah, I actually stated a real case...imagine that.

Maybe you need to read more carefully.

You are failing to see one critical point. Until you see that point, you will think others are dumb, but it is you who is missing the point.

[*]OP posted a question.
[*]Butch1 posted information that is true for almost all states.
[*]You jump in saying Butch1 is incorrect. Your post makes the implication that Butch1 is incorrect for many states, although you do say you live in Florida.
[*]I say Butch1 is correct for many locations, and that your implication is wrong.

Until you realize that you wrote a post that makes people think Butch1 is wrong in their location, you will think all of those posters are dumb. In fact, all you have to do is edit your post to say Butch1 is wrong in Florida (but correct in other states). People from ALL states read these threads. Thus, don't call Butch1 incorrect unless you clearly tell these other readers that your post is only about Florida.

 

[CTrain]

Originally posted by: dullard

Originally posted by: CTrain
Damm, you're about as dumb as they come.

If you read the thread in chronological order, you will see that the BUTCH1 guy jumped in with stuff about cars and crap.
I quoted him and tried to correct the mistake.

I didn't intinially started ranting about cars and Florida.
In fact after, I quoted the guy about cars and Florida, I actually added my own actual purchase of a house under value.
Yeah, I actually stated a real case...imagine that.

Maybe you need to read more carefully.

You are failing to see one critical point. Until you see that point, you will think others are dumb, but it is you who is missing the point.

[*]OP posted a question.
[*]Butch1 posted information that is true for almost all states.
[*]You jump in saying Butch1 is incorrect. Your post makes the implication that Butch1 is incorrect for many states, although you do say you live in Florida.
[*]I say Butch1 is correct for many locations, and that your implication is wrong.

Until you realize that you wrote a post that makes people think Butch1 is wrong in their location, you will think all of those posters are dumb. In fact, all you have to do is edit your post to say Butch1 is wrong in Florida (but correct in other states). People from ALL states read these threads. Thus, don't call Butch1 incorrect unless you clearly tell these other readers that your post is only about Florida.

Like I said, learn to fvckin READ
I specifically said at the end of my post, "This is Florida"

Actually you are INCORRECT.
I bought 2 cars in 2006 and the same exact thing happenned.

I bought a car from a friend of mine.
I got the title and registered it as a $500 purchase. Book value $4500.
A month later, they sent me a letter asking me to verify the price or else I would have to pay the penalty.

Theres 3 ways to verify the price:

1) Have both the seller and purchaser fill out the form they sent me stating the price of the car. Easiest way.
2) A copy of the bill of sale notarized
3) If you can't contact the seller, you need to fill out the form and state the condition of the car.

I registered a second also way under book value and a month later, they sent me the same letter.
Both times I use the option #1 and that was it.
This is in Florida.

 

[dullard]

Originally posted by: CTrain

Originally posted by: dullard
[*]You jump in saying Butch1 is incorrect. Your post makes the implication that Butch1 is incorrect for many states, although you do say you live in Florida.
[*]I say Butch1 is correct for many locations, and that your implication is wrong.

Like I said, learn to fvckin READ

I see it is you who isn't reading. I stated that you did put Florida in your post. But even with that, your post implies that he is universally incorrect. That implication is wrong. That implication needs to be corrected. You cannot write something that implies one incorrect thing, and put a little disclaimer at the bottom and think everything is fine.

 

[CTrain]

Originally posted by: dullard

Originally posted by: CTrain

Originally posted by: dullard
[*]You jump in saying Butch1 is incorrect. Your post makes the implication that Butch1 is incorrect for many states, although you do say you live in Florida.
[*]I say Butch1 is correct for many locations, and that your implication is wrong.

Like I said, learn to fvckin READ

I see it is you who isn't reading. I stated that you did put Florida in your post. But even with that, your post implies that he is universally incorrect. That implication is wrong. That implication needs to be corrected. You cannot write something that implies one incorrect thing, and put a little disclaimer at the bottom and think everything is fine.

OK, I will stop argueing with you because you lack total common sense.
Did I put the "This is in Florida" because I love the state of Florida ??

Common sense will tell you that the original poster said stuff about cars and Florida and I quoted the guy talking about cars and at the end stated "This is in Florida"
If common sense doesn't tell you that I was talking about about Florida, then I will stop argueing with you.

Even a poster below you knew myself and the BUTCH1 guy was talking about Florida but then again, he has common sense.

 

[Tom]

Originally posted by: r6ashih

Originally posted by: Tom
two kinds of taxes involved.

1. property taxes. based on appraisal, not sale value, so shouldn't be affected.

2. capital gains tax. I don't see why there would be a problem, you wouldn't really be avoiding paying it, just delaying it to some future sale at market value. and there's a big one-time exemption for homes anyway i think. But a tax adviser might be able to figure out the best way to do the transaction to maximize the tax benefits for both parties.

btw, i know nothing about real estate or taxes.

property tax is based on sale value, not appraisal value.

not where i live anyway.

 

[apex32]

Originally posted by: SSSnail
Legally, you can sell it for a dollar.

QFT, but it does sound fishy.

 

[Thorny]

Originally posted by: BUTCH1
No matter what amount you sell it for the county or city tax appraiser will tax
the new owner on the actual appraised value, not the sale price. If I sold my 2005
auto to my neighbor for $100 you can bet the DMV will charge him sales tax (FL)
on the blue book value of the car NOT the fact he only paid $100 for it.......

Not in my state, the county MUST go by the sale value for several years after the sale. I believe the time period is two years before they can re-assess.