Discussion:Calling Dennis and Riley2
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Discussion Forum Index --> Advanced Tax Questions --> Calling Dennis and Riley2
Discussion Forum Index --> Tax Questions --> Calling Dennis and Riley2
| 2 July 2008 | |
| Gift tax question...
mom/dad-in-law quit claim a property (for which they paid $210k in 2005) to son-in-law in June 2007. The quit claim deed is by Mom and Dad, first party, to Mom and Dad and Son-in-Law, second party. Assuming the basis is the $210k, what is son-in-law's basis? one-third $70k? or one half $105k? Also, son pays off a mortgage balance of $34k on the same property in April 2007 prior to the quitclaim...my understanding is that Son-in-Law in effect, gifted M&D-I-L $34k, correct? | |
| 2 July 2008 | |
| Absent document specifics you have to look to intent. Who lived in the property? Did Son-in-Law accept mortgage liability as part of the transfer? | |
| 2 July 2008 | |
| Son's basis is his 1/3rd interest in the basis of $210,000, or $70,000 total. Parents amount to report on their gift tax return is 1/3rd of the FMV, not 1/3rd of the basis.
Son gifted Mum & Dad $34,000. It is possible that you could cancel $34,000 of the gift out, treating the $34,000 as a loan to mum and dad which was paid off by gifting the 1/3rd interest to him. This is possible because the two events were fairly close to each other time-wise. That doesn't change his basis of $70,000, but it does change reduce the amount reportable on thier gift tax return by $34,000. | |
| 2 July 2008 | |
| Dennis,
I have looked in the county records and there is no recorded mortgage on the property that was gifted. I then deduced from that finding that the mortgage he paid off must have been on the property that Mom & Dad live in, although I do not see a mortgage satisfaction recorded either. Hmmmm. I just thought of that while writing this post. | |
| 2 July 2008 | |
| Correction, there is a mortgage, there was some confusion on the propery address
Son-in-Law paid off the second mortgage prior to the new deed (the QC that made him a JT owner). This is still really a gift, no? Also, 2 months later, the quit claim deed was filed. There is a first mortgage of which son-in-law agreed to make the payments. So, the interest gifted to him is really one third of the equity, correct? And if that is less than $24,000, I guess we will file in order to elect split gifts but other than that there wouldn't otherwise be a reason to file a 709, correct? Thanks to all of you for helping. | |
| 2 July 2008 | |
| As Lizzit notes, gifts are at FMV. If son assumed mortgage debt parents will recognize gain to the extent that total exceeds their basis in whatever they transferred. Again, if you don't understand the intent of the transaction you cannot characterize it. From what you are posting, son-in-law could own 1/3, 1/2, or all of the property.♫ | |
| 2 July 2008 | |
| Agree with Dennis. A transfer of a joint tenancy interest does not necessarily transfer the equitable ownership to the joint tenant. In other words, I can place my mother and father on the title of my home without making a gift or sale of any portion of the home.
Based on the latest info given, I will guess that parents in law are on title for convenience purposes only, in which case there was a sale for the balance of the first and second mortgages. | |
| 2 July 2008 | |
| Good discussion, we need to retitle the question for search purposes. Though I guess "calling Dennis and Riley" could be catagorized under our "Emergency Department". lol. Oh, and add Katie too. | |
