USA Rolling Debt into a mortgage

[amo315]

My question is this,

My ex wife is having troubles with finances, she currently lives in a home owned by her non resident sister. The amount of debt she is dealing with is around 60 to 70k. My question is this, if my ex was able to get a mortgage to buy her sisters home for the amount owed to her creditors is it legal for her to later sell the home back to her sister and then her sister sells the home for market value plus what is owed on the original mortgage taken out by my ex? The home is currently lien free and it seems like a better idea to use that home to help relieve her debt burden and possibly use equity to pay off her debt, not to mention the tax benefits it would afford her. The home is worth more than 700k and with the market being what it is in California chances are good it will continue to increase in value barring any craziness happening with the US economy.

If she is unable to secure a mortgage would it be possible for her son, who is a US resident and working, to buy the home from his aunt, sell the home later either back to his aunt for remaining balance on the original mortgage or sell it to a third party for a price that gets his aunt a fair return on her investment plus the remaining balance of the original mortgage. In this second scenario will this put the son at risk of a capital gains tax? If so then that option makes no sense of course.

In case my questions seem convoluted the bottom line is this, is it possible to mortgage her sisters home to consolidate her debt, but keep the house in the family's possession and then sell it later paying off the debt and avoiding any crazy taxes owed to the IRS?

 

[kirby]

Hi amo315
This falls apart at step 2.
Let's assume your ex-wife will qualify for a mortgage, but note that she will need to show the bank a significant income enough to cover the mortgage debt payments AND the payments on her current debt. That's a tough one right there.
But going forward with this - Step 2 - When she sells the house to her sister, the bank will not allow the cash proceeds to go anywhere else but to the bank to payoff the mortgage. The bank has a lien on the house that must be paid off FIRST.
sorry

 

[amo315]

Yes, that is understood. If her and her sister agreed to sell the house to her for lets say 40 K, the bank approves a loan and pays her sister the 40k, then her sister allows my ex to use that to pay off her debit. Then later my ex sells the house for 780,000. The remaining amount of the mortgage is paid off, lets assume it is 32K, that leaves a net profit of 748 K. At that point my ex is now liable for a capital gains tax if she does not reinvest it into a new house if I understand the law. So in an alternet scenario what if my ex's sister were to then buy it back for 32 K then resell it for the before mentioned 780 K she would still net 748 K. Obviously this does not include any closing costs, title fees and so on..... So my question is does this scenario work as a legal real estate transaction. The sister is not a US citizen and so my assumption is that no capital gains tax would apply to her, yes her sister will have to deal with her countries tax issues but that will be the case no matter if she just sold outright or helped her sister eliminate some debt by using the house.

Basically she would be using the house as a way to unload debt as quickly as possible with out filling bankruptcy.

 

[kirby]

Seriously, I know of no real-life family where sibling A will sell a $780K house to sibling B for $40K. Moreover where sibling B is nearly in BK. Less risk to sibling A to just give $40K to sibling B.

 

[amo315]

And you obviously don't know any Chinese and how they will do anything to help out a family member, so plz don't waste my time with responses that do not address the question.

 

[kirby]

OK!
Good luck