Answer to: Siblings buying grandparents' home as first time buyers. Please help me identify our blind spots

The discount below market value will be considered a gift under IRS rules, and since it is more than $19,000 per person it must be reported to the IRS by Grandma on form 709. While a gift of this size won't trigger any immediate tax expense, there is a lifetime exclusion of about $14 million and the IRS is picky about reporting and recordkeeping even if a person has no chance of ever exceeding the exclusion. Also, when computing Grandma's capital gains on the sale of the house, the gift amount will almost certainly have to be added to the selling price to reflect the true proceeds of the sale. Consult a tax advisor. And finally, it's important to get an independent appraisal of the true market value of the house at the time of purchase, signed by a licensed appraiser if your state licenses them, and to preserve and safeguard this appraisal as tax document. When / if the grandsons sell the house in the future, basis for capital gains purposes can be based on the appraised value, not the amount that they paid. This will reduce their taxes. Again, consult a tax advisor.