Discussion:Real estate gift
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Discussion Forum Index --> Tax Questions --> Real estate gift
| 28 June 2007 | |
| Brother is transferring property to sister which is worth $250,000, and has a mortgage of $100,000.
Sister will get a new mortgage of $150,000, pay off the $100,000, plus give brother $50,000. We don't want the transaction to be a taxable sale - we want to take care of the tax implications via gift tax return(s). Would the gifts involved be a gift from brother to sister of the net value of the property of $150,000 followed by a gift from sister to brother of $50,000? Or might we consider the transaction simply a gift of $100,000 from brother to sister? Thanks | |
| 28 June 2007 | |
| Wouldn't the basis "carryover" to the sister, and not have an impact on the transaction?
Thanks. | |
| 28 June 2007 | |
| Actually you need basis to determine the point at which you have a taxable transaction. If basis is less than mortgage, for example, debt relief alone produces gain. Absent wiggling here, part sale part gift rules require gain recognition if basis is less than $150,000. | |
| 28 June 2007 | |
| Brother's basis is $80,000. Do you think we might structure the deal as a $250,000 gift from brother to sister, have the brother remain liable for the mortgage, but then have the sister gift the brother $100,000 (probably from the mortgage proceeds)? | |
| 28 June 2007 | |
| Sounds to me like your clients are just attempting to defer taxable gains by disguising the transactions as gifts. Agree w/ Dennis -- likely a part sale, part gift that may require gain recognition to brother. | |
| 28 June 2007 | |
| Yes, and now I have to look at the future mortgage interest deductions for the sister, relating to mortgage proceeds used for gifts (vs. for purchase of the residence). | |
| 29 June 2007 | |
| This is a part-sale/part-gift. The reportable gift on Form 709 is $100,000 (250 - 100 - 50). The reportable gain on Form 1040 is $70,000 (150 - 80). | |
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