Legal Question in Tax Law in Texas

Re: He paid for the house he shouldn't have to pay income tax on it too.

Why would you think that your brother would have to pay income taxes in this situation? At present, you own a house, subject to a mortgage. If you execute a deed conveying your property to your brother, you have made a gift to him of whatever equity you have in the house, just as he made gifts to you when some of his money was used to purchase your house. There are no income taxes at issue here. There could be gift taxes, but since each of you has a $1 million lifetime unified credit (i.e. you can gift a million dollars free of gift tax), there shouldn't be any gift taxes either. If you want a more detailed explanation, please provide more facts -- because from what you have said here, I don't see the income tax issue. What may be more troubling is the "due on sale" clause in the mortgage loan, which could be triggered when you convey title to your brother. You also have some issues involving possible false statements to the lender on the application if anything you said as to who was going to "own" the house, etc., was not strictly accurate, but those are not tax questions.