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Jax Tax
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Gift taxes... Facts Father sells property 5 years ago

Resolved Question:

Gift taxes...

Facts:

Father sells property 5 years ago and assigns held mortgage (seller financed) to son. Father states intent was only for estate purposes only - recording in lieu of a will. Father collects all payments and reports interest on his own return. Did a gift take place upon recording of the sale?
Submitted: 3 years ago.
Category: Tax
Expert:  Jax Tax replied 3 years ago.

Jax Tax : The answer depends on why and for what purpose you are asking. Is he now passed and other beneficiaries claiming the money. If he being audited for gift tax purposes? Other reasons. Is this a school question? What is title of the chapter.
Customer:

Is he now passed and other beneficiaries claiming the money?If he being audited for gift tax purposes? Other reasons. Is this a school question?

Customer:

Is he now passed and other beneficiaries claiming the money. NO If he being audited for gift tax purposes? Not yet Other reasons. Is this a school question? No, real life scenario.

Customer:

Other facts for you to ponder...this occurred in PA. Oral trusts created after November 5, 2006, are unenforceable in this Commonwealth. I was leaning towards argument of oral trust created to son where father was income beneficiary.

Customer:

Again my question...did a gift tax place upon "assignment"?

Customer:

Sorry did a "gift" tax place upon assignment...common law rules state: 1). Was the item in question delivered? 2). What was the actual intent of the donor? 3). Was the item accepted?

Customer:

Would IRS construe that a gift had taken place upon assignment of the mortgage to the son?

Jax Tax : So you just want to know if this is a gift. First, you are right on with the needed items. Intent, delivery, and acceptance.
Jax Tax : You already answered the question. There was no intent to give a current right. He intended on creating a trust.
Jax Tax : He failed as the statute of frauds requires this to be formalized in writing and signed.
Jax Tax : Basically nothing occurred at all.
Jax Tax : Just to cover acceptance. It is typically implied. There was no intent and no transfer. There is no gift.
Customer:

I appreciate comments. One last thought/issue...this "assignment" was recorded at county recorder of deeds office. Does that change anything? The son however was never aware of the recording and as stated, never received any of the mortgage payments.

Jax Tax : As far as whether it meets the definition of gift in general, the recording makes no difference. It is not a gift.
Customer:

I appreciate your assistance!

Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1377
Experience: JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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