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 BK-CPA Your Own Question

BK-CPA
BK-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 795
Experience:  Owner of a CPA firm
36384704
Type Your Tax Question Here...
BK-CPA is online now
A new question is answered every 9 seconds

My wife and I have rental residence in the name of our trust.

Resolved Question:

My wife and I have rental residence in the name of our trust. Put into rental 5-1-08 at $73,612 for structure and $63,339 for land and we want to sell the home to daughter and son-in law for amount of the mortgage $97,000. Pitfalls?
Submitted: 3 years ago.
Category: Tax
Expert:  BK-CPA replied 3 years ago.

BK-CPA :

Hello and thank you for your question.

BK-CPA :

There are rules for when you are selling something to a related party. In general, losses may be deferred until the related party sells the property later in life, or depreciates the property if using it in a business, etc.

BK-CPA :

In some more obscure circumstances, losses may be lost.

BK-CPA :

You should note your ability to gift assets to people.

BK-CPA :

There are annual limits ($13K I believe currently) for making reportable gifts and lifetime limits ($1,000,000 I believe) for lifetime gifts.

BK-CPA :

Lifetime gifts are tied into estate taxes, and after $1,000,000 in giving, you may owe gift tax.

BK-CPA :

The sale/gift in this case is going to transfer your basis in the home to your children.

BK-CPA :

Only the equity in the home, after accounting for the mortgage, will result in that which could be considered a gift or sold.

BK-CPA :

The internal revenue code has some implications for assuming debt as partners in a partnership, etc., that should be considered.

BK-CPA :

(ie... you should also note that a jointly owned rental property is a partnership where Form 1065 generally needs to get filed).

BK-CPA :

The at risk limitations, basis limitations, passive loss rules, etc., should be further considered.

BK-CPA :

Losses and income on the rental should flow properly, as a family, to maximize everyone's benefit.

BK-CPA :

Estate implications, and any retirement implications, should also be considered for you and your wife. Perhaps a trust would be a good idea.

BK-CPA :

This is a bit to consider...

BK-CPA :

I'll hold off for a bit and we can start clarifying things as you see fit.

JACUSTOMER-q774nzfo- :

In view of todays real estate market if I assume there is no equity in the property (proven how?) and gift it to my daughter and son in law who will then use as principal residence. My wife and I have then taken it out of rental status at the time we gift it to daughter. Potentially then no tax impact positive or negative to my wife and I?

BK-CPA :

Your basis in the home for tax purposes will generally be transferred to the kids.

BK-CPA :

The equity is the difference between the fair market value of the property and your debt secured by the property.

BK-CPA :

Your tax basis and your equity are not the same as a side note, with an appraisal being one of your best options for establishing the fair market value at the time of the gift.

BK-CPA :

IRC Sec 1250 may have some implications (relating to depreciated real estate and recapture provisions).

JACUSTOMER-q774nzfo- :

So at future date if they sell they will either have a gain or a loss against the basis created in 2008?

BK-CPA :

Correct... IRC 121 provides an exclusion for the sale of a principal residence.

BK-CPA :

There are restrictions on who qualifies, but in general, the home must be used as a personal residence for 2 out of the last 5 years leading up to the sale.

BK-CPA :

Periods of nonqualified use and dollar limitations would have to be considered if applicable, etc.

JACUSTOMER-q774nzfo- :

Thanks. A lot for me to think over.

BK-CPA :

If you come up with any other questions, I am happy to keep assisting you further.

BK-CPA :

This stuff can be tricky all things considered.

BK-CPA :

Thank you too!

BK-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 795
Experience: Owner of a CPA firm
BK-CPA and 6 other Tax Specialists are ready to help you
Expert:  BK-CPA replied 3 years ago.
What Happens Now?

Your chat has ended, but you can still work with your Expert to get an answer to your question if you have not yet received one.

Come back to this page at any time to see additional information from your Expert.  You will also receive an email when your question is updated.  If you want to send a message to your Expert, use the box below.

If you have already received a satisfactory answer to your question, click the Accept button above.  Experts are credited for each accepted answer they provide.

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
< Last | 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.

    Tax Attorney

    Satisfied Customers:

    570
    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:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    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:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA 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:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.