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Another Reverse Mortgage Question
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jakescia
Posted 2/26/2021 12:55 (#8859741 - in reply to #8858496)
Subject: RE: Another Reverse Mortgage Question



Oskaloosa, Iowa 52577

The reverse-mtg mechanism is merely for a way to mortgage the property to get funds.....ie a re-financing method.  Tax-wise, it does nothing.

Depending upon the size........the parents could split the farm into the personal residence and the commercial farm.

The residence can be sold........with 500,000 of PROFIT.......on a joint return.....being EXCLUDED from federal tax (check the state law, but it will probably be also excluded).

Take a long term option on the commercial farm land.  In that manner, if something should happen that the folks change their will, you will still be able to buy the land at the agreed-upon price...........otherwise, if the will passes the land to you, then even if you have an option on it, you would inherit it with a stepped up basis (Until Biden starts tinkering with the current law.)

You need a good tax-based CPA or tax-based attorney...........just a run-of-the-mill local will not likely know about these things.

Note......if worried about nursing home problems, then consider a trust to shelter the procedures.

Or..........considering the gifting mechanisms...........buy the land and house separately (in order to split the parcel into taxable and non-taxable pieces..............and use the annual giifting mechanisms (parents to each son/daughter in law for the about 15k apiece----- parents 60 to kids, and kids pay back to parents on the contract.  Depending upon other elements of parent's tax returns, and whether or not Biden changes the tax laws drastically, the principal could be shaved significantly..............and if the parents will the contract to the kids, then that would kill the contract at death.

Again.....depending upon the other elements in the tax parent's tax returns, the capital gains might escape taxation completely.



Edited by jakescia 2/26/2021 13:12
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