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APC
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APC
Posts: 13
Registered: ‎11-09-2011
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Selling house under FMV

Is there any tax consequences on both buyer and seller if property is sold under Market value to sibling? maybe $200K less.

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Nanomug
Posts: 10,330
Registered: ‎05-30-2009
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Re: Selling house under FMV

What kind of tax are you referring to?

 

Selling to a sibling, to a parent or child transfers the tax valuation with the home per Prop 13.  Many times this is done when the tax base is very low.

 

Income tax issues might occur and a tax expert would be the best person to consult.  Income tax issues are often complex and the entire financial situation is generally considered in the determination of whether or not the income tax amount would change.

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sheriff
Posts: 2,297
Registered: ‎06-01-2012
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Re: Selling house under FMV

You don't say what type of property it is.  If it is income property and you sell it below market value the IRS may think you are trying to get out of recapturing the amount you have depreciated the property.

APC
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APC
Posts: 13
Registered: ‎11-09-2011
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Re: Selling house under FMV

It is not an income property. I am referring to gift tax. Also, will the property tax be assessed based on sold price or  current market value. I was told that LA counTy assessor office has the right to void the transaction and will get penalized. They might think that we are tryiing not to pay more taxes.

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Mortmain
Posts: 195
Registered: ‎10-29-2012
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Re: Selling house under FMV

It's a good question. I'm not sure it is something that the IRS would pick up, and you should have every right to sell your home for whatever price you want to whomever you want. In my mind that does not constitute a gift. My underdstanding is that the FMV is the taxable base, not the sold price. If you transferrred or 'gifted' over title with no monetary transaction, that may be different and my best guess is that is when the original property tax rate is inherited by the sibling. Just trying to think like the tax man so this is all supposition. Ironically, if you sold for say 20% below (I don't know what the home is worth), you are probably selling at the 'true' value for much of CA, since prices never corrected in many neighborhoods, and are still over-inflated. But that's another story and won't cut it with the IRS. It might be interesting to see what, if any effect the lowered price has on comps in your immediate neighborhood.

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troy-mclure
Posts: 443
Registered: ‎02-26-2010
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Re: Selling house under FMV

"Ironically, if you sold for say 20% below (I don't know what the home is worth), you are probably selling at the 'true' value for much of CA"--- hilarious

and 100% inaccurate.

I'd be curious to read your definition of "true" value 

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Mortmain
Posts: 195
Registered: ‎10-29-2012
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Re: Selling house under FMV


troy-mclure wrote:

"Ironically, if you sold for say 20% below (I don't know what the home is worth), you are probably selling at the 'true' value for much of CA"--- hilarious

and 100% inaccurate.

I'd be curious to read your definition of "true" value 


Tony, in this context it refers to the price at which homes would have reset had they been allowed to. While this happened in some places, it wasn't an evenly spread event, and there are many home values supported by low interest rates, low inventory and a plethora of price propping vehicles from FHA loans to moratoria on foreclosures. Home values need to be determined by certain fundamentals, which we haven't seen for some time. So a definition might be fair market value ceteris paribus. There's been a shift away from home values as a measure, towards affordability, since in a low interest environment that is key to enticing buyers who would otherwise be deterred by the out of reach prices. This distorts perceptions of value since it creates a wider disconnect from the tangibles and the fundamentals. The same can be said for under-values, a characteristic of over-supply, but in this environment with its emphasis on containing deflation, markets which over-corrected are left to their own devises in anticipation of equilibrium returning.

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troy-mclure
Posts: 443
Registered: ‎02-26-2010
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Re: Selling house under FMV


Mortmain wrote:

troy-mclure wrote:

"Ironically, if you sold for say 20% below (I don't know what the home is worth), you are probably selling at the 'true' value for much of CA"--- hilarious

and 100% inaccurate.

I'd be curious to read your definition of "true" value 


Tony, in this context it refers to the price at which homes would have reset had they been allowed to. While this happened in some places, it wasn't an evenly spread event, and there are many home values supported by low interest rates, low inventory and a plethora of price propping vehicles from FHA loans to moratoria on foreclosures. Home values need to be determined by certain fundamentals, which we haven't seen for some time. So a definition might be fair market value ceteris paribus. There's been a shift away from home values as a measure, towards affordability, since in a low interest environment that is key to enticing buyers who would otherwise be deterred by the out of reach prices. This distorts perceptions of value since it creates a wider disconnect from the tangibles and the fundamentals. The same can be said for under-values, a characteristic of over-supply, but in this environment with its emphasis on containing deflation, markets which over-corrected are left to their own devises in anticipation of equilibrium returning.


"Home values need to be determined by certain fundamentals, which we haven't seen for some time." -- such as?

 

pray tell, what SHOULD be the "vaue" of this home?

 

and why should anyone (buyer, seller or lender) care about any number other than what the property sells for "today"?

 

 

Trusted Contributor
Mortmain
Posts: 195
Registered: ‎10-29-2012

Re: Selling house under FMV

[ Edited ]

troy-mclure wrote:

Mortmain wrote:

troy-mclure wrote:

"Ironically, if you sold for say 20% below (I don't know what the home is worth), you are probably selling at the 'true' value for much of CA"--- hilarious

and 100% inaccurate.

I'd be curious to read your definition of "true" value 


Tony, in this context it refers to the price at which homes would have reset had they been allowed to. While this happened in some places, it wasn't an evenly spread event, and there are many home values supported by low interest rates, low inventory and a plethora of price propping vehicles from FHA loans to moratoria on foreclosures. Home values need to be determined by certain fundamentals, which we haven't seen for some time. So a definition might be fair market value ceteris paribus. There's been a shift away from home values as a measure, towards affordability, since in a low interest environment that is key to enticing buyers who would otherwise be deterred by the out of reach prices. This distorts perceptions of value since it creates a wider disconnect from the tangibles and the fundamentals. The same can be said for under-values, a characteristic of over-supply, but in this environment with its emphasis on containing deflation, markets which over-corrected are left to their own devises in anticipation of equilibrium returning.


"Home values need to be determined by certain fundamentals, which we haven't seen for some time." -- such as?

 

pray tell, what SHOULD be the "vaue" of this home?

 

and why should anyone (buyer, seller or lender) care about any number other than what the property sells for "today"?

 

 


Rents, wages, cost of living, interest rates, taxes, cost of labor and materials, supply and demand just to name a few. I haven't done an analysis of this homes value so I don't know what it's value is.
Why should anyone only care about what a property sells for today? That is vacuous question and illustrates the short sightedness that characterized the housing bubble and subsequent crash. It was precisely because so few people were paying attention to what price could do that we got into such a mess. Moreover, although today's value is what you pay, tomorrow's value is either what stand to gain, or lose. So everyone pays a lot of attention to future values both up and down. Your probing misses the more important point about value resets that I was making.
Are you a Realtor?
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Babak
Posts: 1,248
Registered: ‎05-01-2010

Re: Selling house under FMV


troy-mclure wrote:

"Home values need to be determined by certain fundamentals, which we haven't seen for some time." -- such as?

 

pray tell, what SHOULD be the "vaue" of this home?

 

and why should anyone (buyer, seller or lender) care about any number other than what the property sells for "today"?


Seriously? Is this a joke? Did I just dream that time fast-forwarded to 2013 and I woke up? Is it still 2006?

 

I suppose no buyer with a terminal illness should care. However anyone planning to live more than 2-3 years would worry about reality catching up.

 

I keep joking that American memory does not go more than 2-3 years back, and I keep thinking that I'm joking!