DEAR HARRY: In January 2011, my son "Jim" defaulted on his mortgage. His wife had not revealed to him that they were in financial trouble until it was too late. We were able to iron out all the marital issues, and I got all their finances on a current basis. He has a steady job that he's had for years, and he makes about $75,000 a year. We were then able to work out a deal with Fannie Mae for my other son, "Bill," to buy the house for a cash settlement of $257,000 (the house is worth upwards of $300,000). Bill has the cash to make settlement.
Brother came through on mortgage, but expect some fees
Ultimately, we hope that Jim will buy the house back after about five years. Bill does not want any profit. He does expect Jim to pay all the expenses during this period.
Here are my questions. Can Jim avoid settlement charges when he gets the house back? Can they avoid transfer taxes when Bill gives the house back to Jim? Can Jim get a tax deduction for the taxes paid during his period of ownership? Thanks in advance.
WHAT HARRY SAYS: A tip of my many hats to Bill! Some settlement charges will have to be paid. There will be charges for getting the title changed, a new mortgage and the like. There is no transfer tax on transactions between siblings. Jim can get a tax deduction for the taxes if he pays them. A rental agreement can be worked out to cover those expenses during the period of Bill's ownership. Here's hoping that Jim has learned to live within his means.
Email Harry Gross at harrygross@phillynews.com or write to him at Harry Gross c/o the Daily News, PO Box 8263 Philadelphia, PA 19101. Harry urges all his readers to give blood — contact the American Red Cross at 800-Red Cross.
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