Buying my Mom's House/Tax Question/Tenant Problem

[Carrie Penney]

This is a little complicated to explain, but I'll try my best! My mom has gotten behind on her property taxes and her house (fully paid off) was set to go to auction on Tuesday, March 6.

We (fiance and I) have just overnighted payment for the property taxes (close to $20k) to take the house off the auction list and we have made a deal with her to give her $80k after the house re-sells. She bought the house for $95k 5-6 years ago and we are are essentially giving her $100k, so the deal is very fair to her.

The house will probably go for $150-160K after we update it ($5-$8k of work). In the meantime, my mom will move in with us and we will be looking for some type of investment property for her so that she can pay her bills and not get behind on taxes, etc again. This is the second time I've bailed her out (last time was $13k for the tax bill), so now we will be managing her finances for her.

The part that complicates all of this is that she has these "roommates" (married couple) that have lived with her for years. Obviously they have not helped with the taxes at all, or paid any rent. They have paid utility bills for about half of the time they've lived there, but no other contributions. Now they are being very vindictive about moving out and feel that they are "owed" something and that they have some type of stake in the house. Being that we were just gonna have a contract and possibly assign it to another buyer later, or close on it ouselves at some point, we are not the rightful owners and cannot proceed with the eviction of these people. Negotiations have been worthless. We have offered 30 days to move, plus paying their deposit on a place. That will not consider it. They think if they can get a loan and re-pay us the $20k for taxes, they can have the house. Obviously, this is ridiculous, but they cannot understand it.

My mom feels like these people will destroy the house if she leave to move in with us, so we can't even get her out of there like we intended. We've got to find a way to get these other people out first. After they are gone, we will be changing the locks and installing cameras. Also, her house is 6 hours from where we live, so we don't have a good way to monitor it.

So now we have thought about having her "sell" the house to us for a low price ($10 or something) so that we own it and can proceed with eviction. The problem with this is that the IRS will of course treat it as a gift. Even though we will later be giving her $80k and have already paid $20k in taxes. We don't want to owe gift tax or pay on any gain that is not a true gain. Maybe if we have a separate contract outlining the $80k to be paid later, we can avoid this? Not sure.

Does anyone have a better suggestion on how to get these people out? Or how to avoid an unfair tax bill in the future? We really would rather keep the house under contract while we work on it, rather than purchase it.

Thanks guys!