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Mark Taylor
Mark Taylor, Certified Public Accountant
Category: Capital Gains and Losses
Satisfied Customers: 2309
Experience:  Certified Public Accountant
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My son and his wife live in our house for the last 5 years.

Customer Question

My son and his wife live in our house for the last 5 years. This house used to be a rental property. If we give the house to my son and his wife, do we have to pay capital gains tax? We still owe $125,000, the house is worth $400,000, thank you!
Submitted: 1 year ago.
Category: Capital Gains and Losses
Expert:  Mark Taylor replied 1 year ago.

Hi, my name is Mark. I will be happy to help you with your questions.

Expert:  Mark Taylor replied 1 year ago.

You would not owe any capital gains taxes but you would need to file a gift tax return.

Expert:  Mark Taylor replied 1 year ago.

I assume that the home is jointly owned by you and your wife.

Expert:  Mark Taylor replied 1 year ago.

The gift amount would be the difference between FMV and the loan that your son assumes. So $275,000. There is an annual exemption of $14,000 per year per person. So you and your wife could apply this $14,000 to the $275,000. This would lower the gift to $247,000 ($275,000 less $28,000). You would need to file form 709 for both your wife and yourself for a gift of $123,500 (50% of 247,000). This amount would go against you lifetime exemption of 5.45 million. So unless you made sizable gifts in the past there would not be a gift tax consequence.

Expert:  Mark Taylor replied 1 year ago.

I hope you found this information to be beneficial. If this answered your question please take a few moments to rate my response. A rating is needed in order for me to receive credit for helping you today. The rating bar is located at the top of the page – ranging from 1 to 5 stars. If you need me to clarify aspect of my response or if there are additional areas of the question that you would like me to consider please let me know. I would be happy to continue the discussion. It has been my pleasure helping you today.

Expert:  Mark Taylor replied 1 year ago.

Please let me know if you have any questions or need clarification. I am happy to help.