grandmabee Posted February 3, 2009 Report Share Posted February 3, 2009 question about related parties. one brother dies and the father is the personal rep of the estate. the estate has to sell the house and sells to the sister. no equity in the house. 2 loans on it. the sister is going to take a mortgage to pay off both loans. in this market they can not find a buyer for what the balance is on the loans. They had an appraisal on the house and it was lower than the mortgages. I want to double check on related parties rules. I read and think they are ok not related. the sister is not a beneficary of the estate. I am checking on this for the first time buyers credit. Any thoughts? Quote Link to comment Share on other sites More sharing options...
OldJack Posted February 3, 2009 Report Share Posted February 3, 2009 >>first time buyers credit<< Does sister want another loan. The first time buyers credit is just a loan that has to be paid back to the IRS. Related party rules generally apply to losses of the seller (brother's estate) and include member of the seller's family (see code sec. 267a) and in this case the sister is a member of the sellers family. If sister later sells the property at a loss it would not be allowed. Quote Link to comment Share on other sites More sharing options...
jainen Posted February 4, 2009 Report Share Posted February 4, 2009 >>the estate has to sell the house and sells to the sister. no equity in the house<< It looks to me like the sister bought the property for the balance of the loans. Since that was more than the appraised FMV at date of death, the estate must recognize a taxable gain. As for the $7500 credit, the code simply says "the property is not acquired from a person related to the person acquiring such property." I believe the prohibited relationships are as listed in Section 267, so if she is not a beneficiary then she can claim the credit. Quote Link to comment Share on other sites More sharing options...
OldJack Posted February 4, 2009 Report Share Posted February 4, 2009 >>relationships are as listed in Section 267, so if she is not a beneficiary then she can claim the credit.<< After review I have to agree with Jainen that the property appears to have been sold by an estate or trust and as such the sister is not related for this purpose. Quote Link to comment Share on other sites More sharing options...
grandmabee Posted February 4, 2009 Author Report Share Posted February 4, 2009 question about related parties. one brother dies and the father is the personal rep of the estate. the estate has to sell the house and sells to the sister. no equity in the house. 2 loans on it. the sister is going to take a mortgage to pay off both loans. in this market they can not find a buyer for what the balance is on the loans. They had an appraisal on the house and it was lower than the mortgages. I want to double check on related parties rules. I read and think they are ok not related. the sister is not a beneficary of the estate. I am checking on this for the first time buyers credit. Any thoughts? she will be using it as a personal residence so loss would not be allowed anyway. Doesn't plan on selling. Quote Link to comment Share on other sites More sharing options...
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