I can buy a home from my family. What are the major issues that will concern the IRS?
Real estate transactions tend to be major financial events, so there can be substantial tax issues. In the case of buying a home from a family member, there are several questions to raise:
___Are you paying a fair market price? An appraisal or market studies by real estate brokers can establish the value of the property.
___If your family is providing a loan, are you paying a fair market interest rate? The IRS has a minimum fair market interest rate that changes from time to time.
___If you are renting, are you paying a fair market rental? Brokers can document a fair market rental for a like property.
___If you are not paying a fair market price, interest rate, or monthly rental have you then received a gift? If the gift is sufficiently large, say more than $13,000 per year in 2009, then there may be gift and estate tax issues to consider. (For general gift information from the IRS, press here.)
Please see a tax professional for specific advice and current information.
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