transfer money to mom and back

If the house is bought, who owns it? If your mom does, then you need to consider gift tax.

If it isn't bought, the $100K is probably best considered a loan, so there would be imputed interest.

I'd recommend not transferring the money except at closing, the seller doesn't care whether they get 2 or 3 cashiers checks.

Seth

Read up on the gift tax at

8139,00.html.Basically you can give her 13k. Above that, the giver pays gift tax(which is expensive) or they use up their $1 million lifetimeexemption. Using up the lifetime exemption decreases your estateexemption when you die. And if you are married you give 26k (from youand your spouse), and if she is married she can get 52k. There's talkabout whether there should be 4 checks of 13k each, 2 checks of 26keach, 1 check of 52k -- but start a new thread if you want to knowmore.

You can also loan her the difference and charge her interest at the AFR rate at

for September looks to be 4.38% if payments are monthly -- andthat's with zero points -- though she may have to pay $300 in title/escrow fees to secure the loan. You can then forgive 13k, 26k, or 52kof the loan each year. Finally, what if you and her own the house jointly? Could it qualify as your second home, in which case you can deduct the mortgage interest? That is, she pays half of the mortgage and you pay half, and so each of you gets to deduct half of the mortgage interest.

Perhaps your mom does not have much income. In this case, maybe you can buy the house outright as your second home, assuming you don't already have a second home, and deduct the mortgage interest. She can live there. There was talk on this newsgroup about imputed rent, but I don't remember the details, though I think the IRS won't charge imputed rent.

8139,00.html.> Basically you can give her 13k. Above that, the giver pays gift tax> (which is expensive) or they use up their $1 million lifetime> exemption. Using up the lifetime exemption decreases your estate> exemption when you die. And if you are married you give 26k (from you> and your spouse), and if she is married she can get 52k. There's talk> about whether there should be 4 checks of 13k each, 2 checks of 26k> each, 1 check of 52k -- but start a new thread if you want to know > more. (Opinion only:) A single check from a joint account of the married donors with BOTH names of the receiving married couple (in the "pay to the order of" section) may be sufficient for $52k under the splitting rules. Checks from singly-owned accounts to singly-named recipients are where things run into problems (or need multiple checks). Community property issues may also affect the quantity of checks needed.

This reminds me of the Bar Exam gift tax question back in 1967 when I graduated from law school. You have wheels within wheels here.

The first issue is whether this is intended to be a gift or a loan. If you have signature authority over your mother's account and you do not expect to be repaid (you intend it to be a gift), transferring the money to her account is an incomplete gift for gift tax purposes since you have retained the ability to transfer the money back to your account. The gift would be complete for gift tax purposes upon the first to occur of (i) your mother withdrawing the money before you transfer it back or (ii) using the money as part of the purchase price. There would be no gift at all if you transfer it to an account where you have signature authority and then transfer it back to yourself.

If you do not have signature authority, it would be a completed gift at the time of deposit unless your mother was legally obligated to transfer it back to you upon your request. (BTW: whether or not you have signature authority, if the money stays in an interest bearing account and you do not transfer the interest back to yourself, the interest would be a gift even if you transfer the original $100,000 back to yourself.)

Assuming that it is intended to be a gift (which would occur on the first to occur of your mother withdrawing the money or the close of escrow if it is used to puchase a house) you have a present interest annual exclusion this year of $13,000. If you are married and your wife agrees to gift split, there would be two annual exclusions or $26,000. The balance would constitute a taxable gift and would be applied against your $1,000,000 gift tax credit (or applied equally against you gift tax credit and your wife's gift tax credit if you are gift splitting.

If it is intended to be a loan, it should be documented as such at the time that it is used as part of the purchase price or withdrawn by your mother.

In fact, it is really a good idea for you and your mother to document what the deal is before you transfer the money to her account. It makes things simpler and avoids misunderstandings.