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Anne, Master Tax Preparer
Category: Tax
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Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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mi. & ind. state question-my wifes father lives in ind

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mi. & ind. state question-my wifes father lives in ind where the property is located & my wife lives in mi.-her father wants to quick deed his house to her & they both are concerned about any federal or state extra taxes assessed in the process. example: lets say the home is valued (based on rule for this transaction) at 160,000 but sold for 120,000. it presently has a property tax of $3,000. my wife would be able to take a long term capital loss for the 40,000 difference & her father would be able to use the 2million gift tax allowed. other than the normal present $3,000 property tax mentioned are there any other federal or state taxes whatsoever involved in the transaction above? thank you


Thank you for using justanswer. If your father in law gifts his house to your wife, then her basis for tax purposes is the same as his, cost plus any improvements done over the years. Usually, if people purchased their home many years ago, those homes are worth alot more now that what they paid for them. If your wife inherits the house after her father's death, then she will inherit the house at its fair market value on date of death.

If I'm not reading too much into your question, it sounds like they want to sell the house in the near future? If that's true, and if her dad has lived in that house 2 out of the last 5 years, then he can sell the home and make up to a $250,000 profit ($500,000 is married and both spouses lived in home as main residence 2 out of 5 years) with no tax consequences to him. He will keep the profit tax free.

A person may gift an individual up to $12,000 per year without having to file the gift tax form, and that $12,000/person does not go against the lifetime 2 million limit. So your father inlaw may gift both you, your wife, and any children you may have up to $12,000 each again with no tax consequence. (There is never a tax consequence of receiving a gift, all gift taxes are paid by the giver)

I'm not sure why you thought there would be a loss on any sale of your father in law's home, but unless that home is business/investment property, there is no allowable tax loss on the sale of a personal residence.

I hope this helps

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Frequently Asked Questions - 10. Capital Gains, Losses/Sale of Home

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Customer: replied 8 years ago.
i understand that if he quick deeds it over he would be eligible for the 2million lifetime allowance since he wouldn't be selling the house but giving it away to his daughter. the question- is there any other taxes (mi or ind) for this transaction from a federal or state standpoint? based strictly on the quick deed process other than the 3,000 property tax now on the property?

There is no tax consequences to the receiver of a gift, and your father in law will file Form 706 (Rev. September 2007) United States Estate (and Generation-Skipping Transfer) Tax Return. Unless he has exceeded his lifetime 2 million dollar exclusion, this form will be filed as an "Informational Return" only. There should be no other tax consequences from this transaction as you have described it.


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