Buying a condo with the in-laws' money...

[Nagoyaguy]

Hi;

A question for those with greater knowledge of tax laws and real estate than me (that wouldbe just about anyone).

My in-laws have agreed to give us 10 million yen to use as down payment for a condo. Would it be better for them to just buy the place outright, and we pay them rent, or for us to buy the place and have the mortgage in my wife's and my name?

I am wondering in terms of;

a/ mortgage rate
b/ taxation, especially for the in-laws
c/ future inheritance (no worries about siblings as my wife has none. Thinking more in terms of inheritance laws and taxation)

Any advice or whatnot would be appreciated...

[let`s talk]

Inheritance tax is up to 70%.Think twice.

[Trichophyton-in-my-pants]

And you better look up the legacy tax in Japan, since that amount sure as hell seems like it goes in that category.

edit: Let's call it gift tax for ease of googleing. And I looked it up for you. For that amount you will pay 2,3 million of gift tax. Are you up for it?

[sunao]

Beware of the gift with strings attached...



Anyhoo, gifting money, inheritance laws, etc. are complicated in any country... best to talk to a bank, lawyer, or similar...

[Majestic]

Hello Nagoya-guy

Probably a better question for the tax board, but let me take a stab at some of these:

A. Mortgage rate > you can find the mortgage rates at any bank's website. For the sake of argument let's say that here in Japan it is hovering around 1% - 3% (the lowest rates usually come from banks or builders who are financing newly-constructed units. For a used mansion type of place it will be around 3%. Almost any bank will give you a low rate, assuming you and the property qualify for the loan.

B. Your in-laws will be hit with an annual fixed asset tax, as well as a one-time "acquisition tax" on the property. If my memory serves me, the fixed asset tax is equal to 1.3% of the valuation of the property and land. The tax valuation is generally much lower than the actual purchase price. Probably a bigger headache would be the maintenance fees charged by the building manager. This is a case where you don't want the maintenance fees to be too low, because that could mean there isn't enough money to properly care for the building. But of course, high fees are a turnoff for prospective buyers. Anyway, they are something that you should pay attention to. Regarding fixed asset and acquisition tax, I think there may be more information (with links) somewhere on the tax board.

C. If you do a search on "inheritance tax" you should be able to find a mountain of threads on this topic. There is a lingering dread of inheritance tax from the bubble years, when families would be in serious hardship after inheriting a multi-million dollar unit, and would be faced with a hefty inheritance tax bill (payable immediately, without possibility of first selling the place). Anyway, some of the hysteria surrounding this has died down thanks to better advance planning, and of course also thanks (?) to the price of real-estate plummetting since the late 80's. Inheritors get a significant deductible from inherited property. I think it is something like 50,000,000, and then after that there is a graduated tax scale. So if you are looking at a "mansion" that is worth less than that, inheritance tax shouldn't be a massive consideration.

HOWEVER...having said all that I agree that having your in-laws buy a place and then you paying them rent sounds like a recipe for some serious bad karma somewhere down the line. It gives your in-laws leverage over you, and that will start to weigh like a millstone at some point. IF they give you the money, there willl be a "gift tax" payable on that (though there is a certain amount they can gift you tax-free). I think you can find the exact amount if you search on "gift tax"... (something like 1,000,000 a year, but it could be more).

[sunao]

Yeah, there's gift tax and then there's "gift tax"

(Hi Majestic)

[jarjarbinks]

sorry, I'm totally clueless about taxes ...

what's a gift tax ? if a parent decides to give a child some money, he has to pay tax ? that's insane !

also inheritance tax ? can't the parents just 'give' the property to their daughter should their health become failing ? there're many ways to circumvent this tax I think ?

[Trichophyton-in-my-pants]

sorry, I'm totally clueless about taxes ...

what's a gift tax ? if a parent decides to give a child some money, he has to pay tax ? that's insane !

also inheritance tax ? can't the parents just 'give' the property to their daughter should their health become failing ? there're many ways to circumvent this tax I think ?

So, you haven't finished high school right?

[karamatsu]

The gift tax is called zouyozei.

http://ja.wikipedia.org/wiki/%E8%B4%...B8%8E%E7%A8%8E

Anything over 1.1 million yen a year is taxable.