Your parents are liable to pay gift tax on the amount of money they gifted you. The annual gift tax exemption limit for the year 2009 is $13,000. So, your parents will be liable to pay tax on the amount of $37,000. However, a person is also entitled to a life time gift tax exemption limit of $100,000. Thus, your parents will not have to pay any taxes for the gifted amount. The taxes will be adjusted with the annual as well as the lifetime gift tax exemptions.
Amanda Guest
Posted: Fri Nov 06, 2009 8:12 am Post subject: Gift Tax
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So my husband's grandmother could gift us land worth $20,000 (we believe, there is nothing that states this except what we thing) with no tax implications because technically she gifed $10,000 to him and $10,000 to me? Or should we just say the value of the land is $12,500?
The annual gift tax exemption applies to gifts that does not exceed $13k limit. Since your husband's grandmother will be gifting $10k to each of you and your husband, she will actually be gifting $20k, which exceeds the exemption limit. But there's a lifetime gift tax exemption of $1million allowed to each individual. The gift amount in excess of the annual exemption can be adjusted with the lifetime exemption.
T.Dinardi Guest
Posted: Fri Dec 04, 2009 12:06 pm Post subject: Equity Gift
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I would like to purchase a condo from my son. We are using the equity in the condo as a gift to us. Who pays the taxes? Me, the buyer or my son the seller?
Once the property is sold to you and you become the sole owner of the property, you will be responsible for the property taxes. But if there are back taxes, your son should pay them off before selling the property. However, this is negotiable and both you and your son can share the back property taxes and pay them off to avoid any tax lien on the property.
Ed L Guest
Posted: Sun Jan 10, 2010 4:32 pm Post subject: Gift Tax
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Trying to figure out what the gift tax implications might be for the following scenario.
Parents buy an investment property for 150,000 and hold the property for several years as it appreciates to 400,000.
Property is encumbered with a 250,000 loan.
Parents decide to transfer/gift the property to child on condition that the child will refinance and payoff existing loan.
Parents quitclaim property to child and child takes out a 300,000 loan paying off existing loan and keeping remaining balance.
Questions that I have are:
Is the amount gifted the value of
A: the entire property (400,000)(current market value) or
B: the equity that was transferred (150,000) (400,000 current market value - 250,000 parent's loan amount)
Next, are the parents responsible for capital gains on 100,000? (250,000 parent's loan amount - 150,000 original purchase price)
Finally, IF the parents are responsible for capital gains what would the cost basis be for the property?
I've tried to do some research but most of the scenarios I've looked at involve properties that are free and clear. I know in these scenarios the gift amount is equal to the current market value of the property (which happens to be the same as the equity) and that the cost basis is the original purchase price the parents paid.
I've also read that the parents would be responsible for the capital gains if they gifted the property to a charity but have not been able to locate if this applies to transfers to children as well.
If the property you receive as a gift has a fair market value equal or greater than your parent's adjusted basis (the price at which they purchase, plus cost of improvements etc., minus depreciation etc.), your basis in the property will be equal to your parent's adjusted basis. However, if your parents gift you a real estate property with an existing mortgage and you pay off the loan after taking over the property, the amount of mortgage you pay off will be calculated into your basis.
I don't think your parents need to pay any capital gains taxes. The reason I say this is, they have gifted the property to you. It cannot be considered as a sale transaction. Thus, they have made neither gain nor loss. They have just transferred the property to you and there has not been any exchange of money between you and them. However, they will have to pay gift tax for the transfer of the property. There is an annual gift tax exemption of $13k and a lifetime exemption of $1million available to a donor. Your parents can take advantage of the exemption and avoid paying a large amount of gift tax.
However, you should talk to a tax professional as he/she would be the best person to help you in this regard.
Thanks,
Jerry
Ed L Guest
Posted: Thu Jan 14, 2010 1:57 am Post subject:
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Hi Jerry,
Thanks for the reply. The question I still have is what is the amount of the gift? Is it the equity that they are gifting over or would it be the FMV of the entire property?
As far as I know, the gift taxes that your parents will have to pay will depend upon the fair market value of the entire property. The present value of the property will determine the amount of gift they are making. If it's greater than $13k, then they will have to pay the gift taxes. _________________ Good is the Enemy of Great.
Damaris Guest
Posted: Wed Jun 30, 2010 6:25 pm Post subject: Father selling to Daughter
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My dad's is selling me his 6 family buidling and i was told we can do a gift of equity .he is finished paying the house and is worried he will be hit with taxes,we live in NY
The gift of equity that your father will give you will be considered as taxable for your father. However, if the gift of equity is less than $13,000, then he won't be liable for taxes.
Thanks
haleysmom Guest
Posted: Tue Sep 14, 2010 9:05 am Post subject: Trying To Clarify
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Hello, I have read everyone’s wonderful replies. It is my understanding that a mother can give her daughter $13,000.00 and a father can give his daughter $13,000.00 Meaning their daughter received $26,000.00. In addition, it is my understanding that if their daughter is married they can each give her husband (their son-in-law) $13,000.00. Meaning he received $26,000.00. Does this only apply if the daughter’s parents are divorced? Can the daughter’s parents do this, if they are married? Finally, what if it is the daughter’s grandparents that wish to gift her and her husband the money? Thank you. _________________ Need help choosing the right loan? Get free consultation from community lenders/consultant
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