Parents gifting a residence they own subject to a mortgage. Gifting to daughter. Daughter will get a mortgage which will pay off the parent's, she is not assuming the parent's mortgage.

Fmv of residence is 149,000

Basis is 119,000

Mortgage balance is 108,000

Daughter's mortgage loan is 111,000

Right now I'm thinking this can really be a below market sale. Sale price is $111,000, fmv is 149,000, making a gift of 38,000 and parents get the annual exemption.

Parents are asking "is the gift actually 30,000, the diff between fmv 149,000 and their basis of 119,000" and "do the mortgages affect the gift amount" (if not structured as a below mkt sale)

Please help me with this, I thought it was simple but maybe not. Parent's have never gifted before, so there shouldn't be any gift tax due on this exchange.

Thank you

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When the daughter takes out the $111,000 mortgage, how much is she giving to her parents? If the full $111,000, then $38,000 is the gift.

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The parents can't give away something they don't have.

FMV 149000

MTGE 108000

difference 41000, parents equity in home. That is the value of the gift.

Daughter has to come up with a mtge of at least 108000.

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