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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7223
Experience:  15years with H & R Block. Divisional leader, Instructor
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This refers to TAX LAW: I have an apartment I am selling.

Resolved Question:

This refers to TAX LAW:

I have an apartment I am selling. I would like to gift it to my father from my estate. In return, he would gift me $900K from his estate. There would be no formal document linking the above transactions; just the records of the two transactions would exist. We would both fill out the necessary IRS forms (706) of course.

Is this legal? If not, why isn't this done more often? If there is a law/ruling against this, please provide it for me.

Thanks!
Submitted: 11 months ago.
Category: Tax
Expert:  Robin D. replied 11 months ago.

Robin D :

Hello and thank you for using Just Answer,
Yes you can make a gift to your father and your father may in turn make a gift to you. The law on gift tax is, the gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return.
It falls to intent. Are you gifting or are you selling the property?
That is what the IRS would ask should they enquire.

Robin D :

When the IRS sees both the 709 forms then they will see the exchange. It is not a certainty that an audit would be made but what you are purposing is questionable.

Customer:

This is what I suspected. What could IRS do if they decide the gift is intended as a gift but a sale in disguise. Would they slap a capital gains tax on what I received?

Robin D :

They would assess it under capital gain yes. You would only pat CG tax on the difference in basis and sale price (less expenses of sale).

Robin D :

I hope our CHAT was informational.

Robin D :

The system advised you were typing but nothing was posted.

Robin D : Customerhas stepped out of this chat.
Robin D :

I trust then you received the info you needed.

Robin D :

Your positive rating is always thanks enough.

Robin D :

Customer Last Viewed Today at 3:11

Robin D :

If you are having difficulty I can change this to regular Q&A.

Robin D :

We will not be allowed to CHAT in real time though if I change us to regular Q&A. So I hesitate to do that if you have more to ask .

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7223
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and 3 other Tax Specialists are ready to help you
Expert:  Robin D. replied 11 months ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

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Expert:  Robin D. replied 11 months ago.
Some one else wanted me to say :
"The big risk that the taxpayer has is that if he gifts his dad the apartment building, the dad now has the low basis and will suffer the capital gains problem"

I do not think that is the real risk but as your father would be seen as buying it then the basis would be what he paid for it so the basis is only really important if the IRS allowed the "gift".

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