Gift Of Equity Contract Example For Real Estate In Minnesota
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For example, if you own a home worth $300,000 and sell it to a family member for $200,000, they've received a gift of equity of $100,000. A gift of equity can occur if a home is given away for no compensation or if a discount is offered on its value.
The seller must obtain an official home appraisal to ascertain fair market value and also sign a gift letter that describes the buyer-seller relationship and states that the equity is a gift the buyer is not obligated to repay. The buyer must follow the typical process for buying a home.
Use Form 709 to report: Transfers subject to the federal gift and certain generation-skipping transfer (GST) taxes. Allocation of the lifetime GST exemption to property transferred during the transferor's lifetime.
Gifted equity requirements The letter should be signed by the buyer and the seller. Funds must also be properly documented through financial records. So, be prepared to provide copies of your recent bank statements, your donor's recent bank statements, and copies of cashier's checks.