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re gift tax/inheritence tax for property in puerto rico ...

Resolved Question:

re: gift tax/inheritence tax on property held by parents in PUERTO RICO. ex: if we were to buy a $600,000 home for $300,000. or inherit with sister in future.
Submitted: 8 years ago.
Category: Tax
Expert:  The Guy Behind the Tree replied 8 years ago.
There is no Federal inheritance tax.

There is a Gift Tax in Puerto Rico.

Their Gift Tax provisions are not accessible on-line. You can contact their version of our IRS here:

There is an estate tax in Puerto Rico, but the first $400,000 after exemptions, deductions, and credits is exempt. Note that the deductions include the value of property located in Puerto Rico, including all personal and real property owned by a resident of Puerto Rico The estate tax rates are shown here:

Note that if you inherit the property, under US income tax law provisions you will get a "stepped up" basis on the property for capital gains tax purposes. If you are gifted some or all of the property your basis will be the basis of your parents - which means it will cost you capital gains taxes eventually if you are given the property.

Note also that inheriting the property is not a gift, and will not be subject to gift tax.

Hope these thoughts help.
Customer: replied 8 years ago.
Hi thanks for your reply. of course i'll pay. more specificaly what i am asking: my inlaws are non residents,, less than 6 mos per year. rebuilt the home after hurricane georges for around $350,000 were willing to sell to us for $300,000 which is half the current value. we may be or not be residents if we got the house. others including the builder who wants to buy are telling them that the gift taxes would be in the hundreds of thousands of dollars and of course we could not afford that, and the inheritance taxes if they were not to sell would be in same range. any ideas?
Expert:  The Guy Behind the Tree replied 8 years ago.
From my reading of the material on Puerto Rico inheritance taxes I do not agree with the builder. You must admit the "builder who wants to buy" is not a disinterested party, and is likely to tell you what HE wants you to believe.

In order to be confident, and to have your parents confident, of the best course of action, it seems to me that you - or they - should consult an independent, reliable estate attorney IN PUERTO RICO to confirm the material I've referenced in the prior answer. Let them show you the exact law(s) that cover the inheritance taxes, if any, and the gift taxes, if any. Then a confident decision can be made.
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