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Offer gifts without having the liability of tax

Posted on: 21st Dec, 2005 02:18 am
Hi,

Our son lost his job and is not able to make the mortgage payments on his home. The amount of the mortgage loan is 150000. We are aware of the fact that we cannot give him the money without having the taxes due on the money. Can he deed the home to us and then we payoff the mortgage loan?
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?
Posted on: 06th Nov, 2009 07:12 am
Hi,

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.
Posted on: 10th Nov, 2009 04:02 am
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?
Posted on: 04th Dec, 2009 11:06 am
Hi T.Dinardi,

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.
Posted on: 08th Dec, 2009 11:48 pm
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.

any help or insight would be greatly appreciated.

thanks!
Posted on: 10th Jan, 2010 03:32 pm
Hi Ed,

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
Posted on: 12th Jan, 2010 02:03 am
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?

Thanks!

Ed
Posted on: 14th Jan, 2010 12:57 am
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.
Posted on: 14th Jan, 2010 02:34 am
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
Posted on: 30th Jun, 2010 06:25 pm
Hi Damaris,

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
Posted on: 30th Jun, 2010 10:45 pm
Hello, I have read everyons 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 daughte parents are divorced? Can the daugh parents do this, if they are married? Finally, what if it is the daught grandparents that wish to gift her and her husband the money? Thank you.
Posted on: 14th Sep, 2010 09:05 am
Hi haleysmom,

Your query has been replied to in the given page:
http://www.mortgagefit.com/know-how/giftequity-letter-1.html#182285

Take a look at it. Hope it helps you.

Thanks
Posted on: 15th Sep, 2010 12:28 am
my dad added me to title on his pay off house. now he is removing his name from title 4 months later. will he or i need to pay income tax?
Posted on: 18th Sep, 2010 04:09 am
Hi ron,

If the property is solely in your name, then you would be liable for paying the taxes in regards to it.

Thanks
Posted on: 20th Sep, 2010 02:18 am
I sold my rental to my son for $190,000.00 gave $38,000 gift equity and also paid all closing cost so he only needed loan for $152,000.00 once all done with paying miortgage off i only walked away with $49,000.00 so what taxes will i need to pay
Posted on: 03rd Dec, 2010 08:04 am
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