Discussion:"Rents" from parents
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Discussion Forum Index --> Basic Tax Questions --> "Rents" from parents
Discussion Forum Index --> Tax Questions --> "Rents" from parents
| 14 March 2008 | |
| I just can't pin point an answer I like. I have a client that purchased a home for parents to live in. The client (son) just used part of proceeds of his personal residence refi to buy the home. Parents pay a nominal fee (certainly could be considered "below market rent"). It certainly doesn't look like it fits a true rental property situation, so I'm not doing that. But, I just can't see reporting the parents' payments as income. To me, it just basically offsets the property tax, insurance, and some of the interest on the refi loan that the son is paying.
Can I just ignore the payments the son receives from the parents, and the son also NOT DEDUCT anything related to this property (i.e. - the property taxes)? | |
| 14 March 2008 | |
| Discussion:Residental rental - not for profit | |
| 14 March 2008 | |
| Whether treated as a true rental (rents arguable at FMV, and report it all on Sch E), or treated as not fmv rents (and therfore income goes on front page and all deducts get lost on Sch A - not itemizing), the person will end up paying tax on the "rents" when it's all said and done. And if it does make it on Sch E, yes, now we get depr, so net taxable for the year may be 0, but when property is sold depr gets recaptured, so really end up paying tax on these "rents" in the end.
One final thought - maybe the parents "gift" $4,800/yr to the son, once a year, rather than paying the son "rents" of $400/mo. Gift not taxable. Then the son in turn has "gifted" FMV of housing - say it's worth $6,000/yr - still under $12,000 - so no tax affect. So, son never pays tax on the monies from the parents, and then just pays tax on any true appreciation when it's sold. That sounds fair to me. Anyone else?? | |
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