David Ingram Answers:
Your parents-in-law do not have to pay income tax on the
profit on the house but they "could" end up in a gift tax situation.
I am assuming that they lived in it for 3 1/2 years before they moved out
and will have lived in it for 3 years out of the last five.
However, to avoid gift tax which occurs after a gift of more
than $10,000 to anyone but a spouse, they should loan you the $85,000
Equity and forgive $40,000 a year.
Assuming they both owned the house, Mom could give you and
your wife $10,000 each this year and Dad could do the same. that would
handle $40,000 a year.
If you made the equity $80,000, it would be done by next
January and could have been done by now if you had transferred the house in
Dec 2002.
If the appraisal showed the equity was $100,000, it would
take two years and a couple of months to get rid of the gift.
For the benefit of anyone else
who wants to ask a question, you can click on the our site here:
David Ingram - www.centa.com
the CEN-TA Group
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