How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Christopher Phelps Your Own Question
Christopher Phelps
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience:  CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
84937
Type Your Tax Question Here...
Christopher Phelps is online now
A new question is answered every 9 seconds

tax reporting procedure

Customer Question

my son qualified me for a loan and he was added to the mortgage and the deed of my real property. i control all rents and take all deductions for the rented portion of the real property and we hold the deed in joint tenancy. are we reporting our taxes correctly and what will happen in the future if i pass away? i have two other sons as well.
Submitted: 11 years ago.
Category: Tax
Expert:  Christopher Phelps replied 11 years ago.

As joint owners in the rental portion of the property you should each be reporting your share of the income and expenses on Schedule E of your tax returns. I assume you live in the non-rental portion which is your principal residence. You son owns his share in that part of the property as well. If he transfers the property without due consideration (i.e. makes a gift), he may be required to file a gift tax return (if the fair market value of the gift exceeds $11,000 per donee) and pay gift taxes (or just reduce his $1,000,000 lifetime gift exemption).


As joint tennants, if you pass away the property will automatically pass to your son on the title. The other sons will have no immediate rights, although they may challenge the owner son in court under various legal theories. The owner son's cost basis will increase to the extent the fair market value of your share of the property exceeds your cost basis (if you live in a community property state then the cost basis steps up to its entire fair market value).



Because it is impossible for me to identify and consider ALL the relevant facts, this advice is not intended or written to be used for the purpose of avoiding penalties, and cannot be used for that purpose.

Customer: replied 11 years ago.
Reply to Christopher Phelps's Post: did i transfer property to my son when he qualified me for a mortgage loan. assuming i did,
there was no consideration should i had filed a gift tax return or am i able to just reduce my $1,000,000 lifetime gift exemption? could you briefly explain the lifetime gift exemption? thanks
Expert:  Christopher Phelps replied 11 years ago.

When you transferred an interest in the property to your son, you made a completed gift. To the extent the fair market value of the gift exceeded $11,000, you have incurred both a gift tax liability as well as created a filing requirement.


The gift is reported on form 709 ( http://www.irs.gov/pub/irs-pdf/f709.pdf) where both your gift tax liability and exemption is computed. You receive an lifetime exemption credit equivalent to $1,000,000. To the extent your gifts to one individual exceeds $11,000 in one year, you will use up a portion of that exemption equivalent amount. Your son assumes your cost basis and holding period for the portion of the interest you gifted to him.


Based on the information you presented, it appears you gifted a 50% interest in the property to him. Accordingly, to the extent the fair market value of that interest (i.e. 50% of the FMV of the property on the date of gift) exceeds $11,000, you have made a taxable gift and should file a gift tax return. Its better to file late then not at all. You stand a better chance of avoiding penalties. You should get a full appraisal as of the date of the gift to support your valuation.


Please note, if your son gifts the property back to you, he will be in the same predicament.


Because it is impossible for me to identify and consider ALL the relevant facts, this advice is not intended or written to be used for the purpose of avoiding penalties, and cannot be used for that purpose.


Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience: CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
Christopher Phelps and 3 other Tax Specialists are ready to help you
Customer: replied 11 years ago.
Reply to Christopher Phelps's Post: EXCELLENT EXPLANATION. THANKS A MILLION! JOAN
Customer: replied 8 years ago.
THANKS

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Previous | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    577
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    577
    10 years experience
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    1245
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3882
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/TA/TaxRobin/2013-8-28_16186_femalebusinessprofessionalbinderhand11038485.64x64.jpg Robin D.'s Avatar

    Robin D.

    Senior Tax Advisor 4

    Satisfied Customers:

    11072
    15years with H & R Block. Divisional leader, Instructor
  • http://ww2.justanswer.com/uploads/YI/yirtual/2015-3-12_43754_egan.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    8621
    Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2884
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/FA/fastfile/2011-12-15_23139_Klein2011small.64x64.jpg R. Klein, EA's Avatar

    R. Klein, EA

    Enrolled Agent

    Satisfied Customers:

    1837
    Over 20 Years experience
 
 
 

Related Tax Questions