Home Forums Hunting & Shooting Hunter's Campfire Taxable gift question

I plan to talk to an accountant tomorrow but thought I would check here as well since some of you may know or have some suggestions about the best way to go about this.

We thought we were about to buy a for sale by owner home recently but the owner decided not to sell. We are now in negotiations with another couple who wish to sell their home as a for sale by owner. This couple has an assumable FHA mortgage with a balance of about $185,000 at 4% which is quite attractive. The mortgage lender that I had been planning to use said rates are at 7.375% on a 15 year fixed right now so getting 185k at 4% would really save us a bunch of interest.

We have quite a bit of cash to put down but not enough to fully fund the remainder of the purchase price. So somehow we need to come up with some more cash.

Yesterday my brother offered to loan us whatever amount extra was needed (unsolicited I might add). I had been thinking about cashing out a Roth IRA account to come up with the extra (I am 59 and think that I could do that without a penalty but need to confirm that) but when he offered I thought wow, ok and thanks brother.

In the middle of the night though I wondered if he could do that without any incurring any tax and if we could accept that money without having to pay tax. I looked up non taxable gift amount and it looks like for 2023 it is $17,000. If he gifted that amount to me and the same amount to my wife that would pretty much cover the extra that we need. I am still unsure if we would need to pay taxes on that gifted money. If we do, then this plan will not work.

We plan to pay him back if we do accept the money and then wonder if he would have to pay tax on that money.

Anyway, I would appreciate your thoughts if you know the real deal on this type of situation.

Don't touch your Roth. Why would your Bro pay tax on the gift? He already paid taxes on the money he's gifting.
Take the gift, then pay him back for that "time in the place with the guy" that Uncle doesn't have to know about.. or
Your Bro. Have school aged kids? Set up a 529 college fund , pay him back into that. Grows tax deferred, launders the paper trail, money doesn't ultimately have to be be used for education.

Get your final answers from a CPA...

If I was doing the gifting like you described (for my sister (or whoever))... I would simply add them to my checking account and then from that account they would write a check for the funds required.

Same as when I come to die... I will add whoever to my accounts... when I pass they take over the accounts... No probate to settle because I died with no money belonging to ONLY ME.

Do the same thing with cars, trucks, land etc.

Adding Joe Bob to my car title... when I kick, Joe Bob is the owner of the car.

Same with an NFA Trust.

Again... check with the Pros, but I am fairly confident this information is sound.

You might wanna follow your own advise and see a "pro". "Joe Bob" would own HALF interest in the vehicle, land, whatever.

simply adding name to an account won't do it unless JTROS in many cases, check your laws.

If you pay your brother back, it's not a gift. The IRS has specific rules for such transactions and you must pay interest on the loan using a formula the IRS provides. I personally would not borrow money from a family member under the circumstances but everybody is different.

I believe you can withdraw your Roth contributions without penalty at any time. You can withdraw Roth earnings if you’re 59 1/2 or older. Whether to use your Roth funds or borrow the amount you need is a question for you and your CPA.

If you do the deal with your brother, be VERY CLEAR about the terms. It’s not a gift. It’s a loan. Put it on paper with all the terms, interest, and repayment schedule written down. Leave no room for misunderstanding. To do otherwise is to invite family arguments that will last forever. Don’t think it can’t happen in your family. Yes it can, and the time to prevent it is now.

Unless the rules have changed, you must prove where every penny you are using for down payment/closing costs came from. We had to provide 5 years worth of tax returns, bank statements etc.
Be careful on loans and gift money for such.

This is what I would do.

I have zero knowledge of NH laws.

I do have valid experience with some/much of this in my Commonwealth.

Again... The OP should SEEK OUT PROFESSIONAL Counsel and NOT rely on on 24HC for summary opinions.

I didn’t think there were any assumable mortgages left.

Ask your accountant.
Do not touch the Roth.
I’m 99.9% sure he can gift each you and your wife without any taxes paid by anyone. The amount I’m not sure, as it increases every year, but it’s around $17,000 per recipient.

Thanks all, I hope to get in touch with my accountant today and my brother plans to do the same.