Question: Our son lost his job and has been unable to
make the mortgage payments on his Chandler home. The amount of
the mortgage loan is $150,000. I know that we cannot give him
the money to pay off the mortgage loan without him having taxes
due on the money. Can he deed the home to us and then we pay off
the mortgage loan? Our son would then have time to find another
job, and our grandchildren would not have to leave all of their
friends.
Answer: You are allowed to give the $150,000 to your son
with no tax liability to your son. You will have to file a gift
tax return, but you will only owe gift tax if the gift tax exemption
is exceeded (currently the gift tax exemption is $1,000,000.)
Note: When you said incorrectly that your son would pay tax
on the $150,000 if you gave it to him, I think that you were confused
with the principle that forgiveness of debt is taxable income.
In other words, if the mortgage lender “forgave” the $150,000
mortgage loan, and your son no longer had an obligation to pay
this $150,000 mortgage loan, your son generally would have $150,000
taxable income.
