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ShawnA, Retired CPA
Category: Tax
Satisfied Customers: 2291
Experience:  Retired CPA
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What is the best way to get your home out of your name. By

Resolved Question:

What is the best way to get your home out of your name. By gifting it to the children or by
selling it to them? What are the tax consquences?
Submitted: 2 years ago.
Category: Tax
Expert:  Richard replied 2 years ago.

Good morning. Either way gets it out of your name. If you gift it or sell it for less than fair market value and need nursing care paid by the government within 5 years of the transfer, then the government can bring the gift amount or amount under fair market value, whichever is applicable, back into your asset base for calculation of your eligibility. If you sell the property, if there is any gain on the sale, the gain would be eligible for the exclusion from capital gain tax for the sale of your principal residence to an amount up to $250,000 in gain ($500,000 if married). If you gift the property or sell it for less than fair market value, any gift or deemed gift (the amount by which the value exceeds the sale price), would not likely be taxed unless the total amount was high. There should be no gift tax consequences. Each donor can give
$13,000 per year per person under the annual gift exclusion. In addition to
that, each person has a $5,000,000 lifetime exemption....which means a person
can give a cumulative amount of up to $5,000,000 in gifts without incurring
gift tax....the donor must file a gift tax return to let the IRS know how much
of the lifetime exemption is being used, but there will be no gift tax until cumulative
gifts have exceeded the $5,000,000.

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Customer: replied 2 years ago.
Someone said that if you gift the house to your children and a divorce should occur, the spouse will not be entitled to the home. If the home is sold to the children, then the spouse will be entitled to the proceeds of the home should the children sell it down the line.
Expert:  Richard replied 2 years ago.

I'll defer to the Connecticut divorce lawyers on that issue and opt out. Take care.

Expert:  ShawnA replied 2 years ago.

Hello. My specialty is focusing on YOUR Financial needs. Financial Planner/Business Owner for 20 years. CPA,PFS,QFP,GMMA.

If you gift it to the children it becomes theirs. Even you won't have a claim to it, let alone a divorced spouse.

The same hold true if the hiouse is sold (not gifted) to the children. No one will have a claim on any monies relized if the children sell it except the children. The notion that spouse will be entitles to the proceeds is false.

Customer: replied 2 years ago.
Is selling a house for fair maket value the same as selling it for $1.00? Which would you recommend doing if any?
Expert:  ShawnA replied 2 years ago.

If you seel the your house for 1.00 and then they sell it later they have the selling price-1.00 to pay taxes on.

If you gift it to them they at least get they get YOUR cost basis.

Rather than sell it for 1.00 I think gifting it to them makes more sense. You'll have to reduce your estate tax credit but it should still be well worth it.

Selling it for fair value market means selling price - cost-improvements = gain.

if you are married you get a 500K exemption on taxes.

I think selling it to them at FMV would be the best. What was your cost? What is the FMV? Are you married or single/divorced?

Expert:  Robin D. replied 2 years ago.

The receivers of your gift will use your cost basis even if you "sale" at $1 because anything less than Fair Market Value is deemed a Gift by the IRS. If you gift the property out right or have the usual deed change showing $1 as sale price, when or if they sale their basis will be whatever your cost or adjusted basis would have been.

If you sale to them at fair market price then you will need to report if you can not exclude the gain using your exclusion for main home. If you gift you will need to report the gifts that are over $13000 in value to each child. If the property value divided among them is not over $13000 to each of them you would not need to report the gift.

You should still check with an actual Conn State Attorney as the first expert advised to make sure there are no specific laws in Conn about property and divorce.

Expert:  ShawnA replied 2 years ago.

Alternatively there are other ways. the house can be placed into a family partnership.

I'll wait for your answer regarding your cost, fmv and marital status.

ShawnA, Retired CPA
Category: Tax
Satisfied Customers: 2291
Experience: Retired CPA
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