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Balls Deep
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ok, here is the story...

my grandfather has decided to sell his farm. he has offered it to anyone in our family. none of us can afford, or need an old dairy farm, except his nephew john, who owns the farm next door. (he has been leasing all the farmland for his crops for years now) my grandfather wants to sell it to john for 4k an acre, but my aunt says she thinks it would be appraised much higher. shes not concerned about his profits, but that there is a law that states grandpa would have to pay a tax on the difference between the selling price and appraised price.

is anyone here familiar with this said tax, or a way around it if it does exist?
 

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Glad I'm not Gay J. Hall!
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I've never heard of that tax, and i think 4k per acre seems high, but i haven't priced land yet, I know farm land is usually cheaper then wooded undeveloped acerage, which i thought was going for about 4k, If you make too much money on it they would have to pay "property gains tax" I think that's what they call it. The only way that you would have to pay the difference is if he is sick, then medicare get's in all your shit trying to get the most for it to cover medical costs!
 

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hicktown
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well we had land for us at 5g a acre is what it is wroth about if its good farm land
 

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hicktown
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yup i have naver here of a differs tax the income tax form you will have to pay but sell in in scitions so it looks like he made less sell 1/3 each yera thats how my gandpa did it to my dad
 

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DrivewayJeeper
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10,957 Posts
I've never heard of that tax, and i think 4k per acre seems high, but i haven't priced land yet, I know farm land is usually cheaper then wooded undeveloped acerage, which i thought was going for about 4k, If you make too much money on it they would have to pay "property gains tax" I think that's what they call it. The only way that you would have to pay the difference is if he is sick, then medicare get's in all your shit trying to get the most for it to cover medical costs!

wow you think 4k is high? see one acre parcels around here for $25-40k...its its on the edge of farm land, ie old farm land.
 

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Catch the wave
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bogie lake golf course, sold as undeveloped land for over 50k/acre approximately 8 years ago, and it required extensive land balancing before it could be turned into the subdivision that is currently is...

as to the question at hand, I have been a certified property tax assessor for over 18 years, and have never heard of any income, or capital gains tax on the "gifting" essentially of the fair market value vs. the deeded sale price of property to a relative - especially if this is done prior to it being part of an estate/probate.

that being said, the brother/uncle or whatever will, according to the law see the property uncapped if the assessor does his/her job properly, and/or is made aware of the sale.

attempting to hide the sale is not really advised either, as if/when it is found out some time in the future, the property will be uncapped back to the actual date of transfer, and then "rolled forward" - resulting in a what would presumably be a very large property tax bill, that if delinquent then puts the property at risk for foreclosure, and eventual auction by the county treasurer.
 

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Glad I'm not Gay J. Hall!
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wow you think 4k is high? see one acre parcels around here for $25-40k...its its on the edge of farm land, ie old farm land.
prices change when you go from a 100 acre farm to a 1 acre parcel, his grandpa could get a bunch more money if he wanted to parcel it off, and like i said it's been a while but if farmland is going for 5k per acre then 4k is a fair price to a family member, and as long as there are no other people involved in the sale you can sell for as much or as little as you want as far as i know, If the land is free and clear that is, otherwise you have to get enough to pay the bank off of course.

And land is like everything else, it's only worth what someone will give ya for it if ya wanna sell it. It may apprase at 10k per acre, but I doubt someone is gonna pay that much for it. but maybe?
 

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Covered in mud...
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I asked the same question and haven't found a true answer, since I'm buying a house from my parents.

From what I've found, it should fall under gifting guidelines, but its muddy.
 

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Catch the wave
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I asked the same question and haven't found a true answer, since I'm buying a house from my parents.

From what I've found, it should fall under gifting guidelines, but its muddy.

I wondered if you were going to chime in with any research you may have done outside of this place. "should" is the operative word I guess, and anyone who has reviewed several appraisals of even the same property will tell you, that the appraisal of property is as much art, as it is science. Even the IRS, and courts recognize that, and given that this is not a probate/estate/medicaid issue you will probably not find someone attempting to apply the gift tax to the perceived gap in market value vs. what you are paying for your parent's house.

There are also obviously numerous ways to deed/title a piece of property, from trustee's of a trust, to joint tenants, to tenants in common, etc., etc. and it's not uncommon actually to see multiple deeds filed in short order (literally signed the same day) along these lines - probably in an effort to avoid paying some form of taxation...

if you aren't using a broker to sell your existing house, then spend a couple hundred and seek the counsel of a real estate lawyer for the piece of mind, or for some ideas on how to legally avoid having your parent's house uncapped when you purchase it
 

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Banned
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it all depends on the location and the acreage. my dad sold one of our hunting properties in fife lake 2 years ago that was 80 acres with a 9 acre field for 3k an acre. it was heavily wooded, but about 35 acres was cedar swamp that was no good for development. he only paid 32k for the whole property 9 years ago. good farmland goes for 3-4k an acre in my neck of the woods(pentwater) but then you have to figure in the cost of tileing or retileing which is about 700 dollars an acre if you get a good deal. IMO, forget farming and build condo's on it.
 

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Covered in mud...
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I wondered if you were going to chime in with any research you may have done outside of this place. "should" is the operative word I guess, and anyone who has reviewed several appraisals of even the same property will tell you, that the appraisal of property is as much art, as it is science. Even the IRS, and courts recognize that, and given that this is not a probate/estate/medicaid issue you will probably not find someone attempting to apply the gift tax to the perceived gap in market value vs. what you are paying for your parent's house.

There are also obviously numerous ways to deed/title a piece of property, from trustee's of a trust, to joint tenants, to tenants in common, etc., etc. and it's not uncommon actually to see multiple deeds filed in short order (literally signed the same day) along these lines - probably in an effort to avoid paying some form of taxation...

if you aren't using a broker to sell your existing house, then spend a couple hundred and seek the counsel of a real estate lawyer for the piece of mind, or for some ideas on how to legally avoid having your parent's house uncapped when you purchase it

Hmm, I'm buying it many tens of thousands BELOW current SEV, since they've olny owned the house for 6 years.

I've seen several examples of this being asked in real estate columns, magazines, etc. All of the legals guys there sy its a gift tax thing, but of course, they are CYA'ing it.

Our family has goofy tax structures anyway, and usually annually max our gift taxes, so we want to be careful.
 

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Catch the wave
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Hmm, I'm buying it many tens of thousands BELOW current SEV, since they've olny owned the house for 6 years.

I've seen several examples of this being asked in real estate columns, magazines, etc. All of the legals guys there sy its a gift tax thing, but of course, they are CYA'ing it.

Our family has goofy tax structures anyway, and usually annually max our gift taxes, so we want to be careful.
heh, in today's market, many people are buying properties, from folks unrelated for many tens of thousands below SEV, not just off of bank/repo's. it's a very complex market these days... (read into that what you will)

yeah, I have read with some interest about your grandpa's car collections, and assumed that there was already some legal advice somewhere in the fray. by being careful you might not only talk with said attorney, but perhaps a CPA as well.

my wife is sort of a trust fund kid herself, just not to that level of gifting until recently, when grandpa died, his trust is now paying out small amounts annually...
 

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Catch the wave
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Check out a life lease
one can also do a warranty deed, reserving a life estate, subject to land title standard 9.

been seeing quite a few deeds recorded from a parent to themselves and their children with that language on them lately.

the idea being to avoid probate, and quite possibly avoid the uncapping that takes place when the parent effectuates the transfer upon their death, since most assessors don't read the death certificates that get recorded - and finally cause not every death certificate gets recorded until a property is re-sold, and even at that, quite often a death certificate may get recorded in some other county than that in which the property resides.

in fact, a colleague of mine is going to attempt to do just this.

record a deed reserving a life estate to herself, and her husband to them all, plus the children.

said property is a family vacation home, on the water in the northern lower peninsula. upon her/husband's death, the certificate would be recorded here in oakland county, leaving the assessor up north clueless that the property is now legally owned by her children...

the only thing that would alert the assessor, is if the kids needed to pull any equity out of the house, or sell off their portion/share and record the deed for such...
 

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6'-5" 209LB 16YR LEFTWING
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I purchased my Brother's house, and 17 acres on a private lake for $15K on a Quit Claim.
I did not have any issues, but that was 10 years ago.
 

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Catch the wave
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I purchased my Brother's house, and 17 acres on a private lake for $15K on a Quit Claim.
I did not have any issues, but that was 10 years ago.

quit claim deed? did you ever pull out any equity from it? ever get a warranty deed/title, or title insurance on it?

a quit claim deed only quit claims any interest he may have in the property to you, it does not technically convey clear title to you for what it's worth...

technically, I can legally quit claim to you, and legally record a quit claim deed to the mackinac bridge, but seeing as I have no legal interest in it, you wouldn't afterwards either....
 

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6'-5" 209LB 16YR LEFTWING
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quit claim deed? did you ever pull out any equity from it? ever get a warranty deed/title, or title insurance on it?

a quit claim deed only quit claims any interest he may have in the property to you, it does not technically convey clear title to you for what it's worth...

technically, I can legally quit claim to you, and legally record a quit claim deed to the mackinac bridge, but seeing as I have no legal interest in it, you wouldn't afterwards either....
ah, yah, that goes without saying, since I was able to turn it around 5 years later and sell for 150K.
 

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Premium Member
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1,329 Posts
No exemptions on Nephew.........Grandfather to Grandson Yes....... Exemptions on Tax Or are you talking Capital gains tax.....If so......Gramps would have to pay that... Nephew is too far out on the Tree Branch...
..you can look up state exemptions on state and county tax........ Sorry I don't have a list here at home with me........

They can also check with the Equalization Dept. in the County they live in...they can give you the values and it's up to Gramps to sell it for what he wants.. But he will personally have to pay capital gains.

I work in the Register of Deeds Office Eaton County

If he buys it on land Contract....make sure it's recorded !!!! Too many people don't record them and it leads to a butt load of problems down the road .
Also don't pay the Big Title companys to do Title work...independents are usually cheaper...Right now they are Starving... and eager for any work !

Most forms are available online or even at Office supply stores..( We have some in our office and mail them to you if requested ).make sure you have the Michigan guide lines before doing the paperwork......but It's better then paying a FAT attorney to have his secretary fill it out !
 

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Registered
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I don't see how they could tax the delta between the sales price and the "appraised" price. Order 5 appraisals and you will get 7 different values. The only price that matters is the one someone writes on a check.
 
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