Q: We are thinking of selling our house, which is mortgage free, to one of our children. He would obtain a conventional loan on the property. Are there any restrictions on this kind of a deal? We are senior citizens. Would we obtain the same tax benefits as selling on an open market? We would sell at an appraised value.

A: It really does not make a difference whether you sell your home on the open market or to one of your children. The rules -- and most of the tax provisions -- are really the same.

You have indicated that you own your home mortgage free. Have you considered selling to your children and taking back the mortgage yourself? If you need all of the cash now, this proposal would not work. However, if immediate cash is not needed, you could take back a 30-year mortgage at an interest rate which will generate a nice monthly income for you. And your children will be pleased since they probably can save many of the up-front lender's costs, such as appraisals, points, credit reports and other such charges.

A properly drawn mortgage (deed of trust) can be signed by the buyers.

Don't be scared by a 30-year mortgage. While I recognize that it seems like a long time for you (at your age), the fact remains that most mortgages are paid off over a 5-to-7 year period -- either because the house is sold or the mortgage is refinanced.

If you cannot take back a mortgage, then there are no restrictions on your children borrowing from a regular mortgage lender. At settlement, you would be paid all of the proceeds from the sale. Don't forget that under the new tax laws, all taxpayers age 55 or older are eligible for a once in a lifetime opportunity to exclude the first $100,000 of the gain on the sale of your personal residence. In practical terms, this means that the first $100,000 profit is nontaxable.

To qualify for this exemption, the seller must have owned the residence and have used it as the principal residence for at least three years during the five-year period preceeding the sale. If you are over 65, you may use the old test of "five out of eight years" for sales through July 25, 1981.