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My wife and sister-in-law are inheriting a home in

My wife and sister-in-law...

My wife and sister-in-law are inheriting a home in California from their mother. If my wife agrees to sell her half to her sister at less than market value, would the Gift Tax apply to the portion of the price reduction over $15,000.00?

Lawyer's Assistant: Since estate law varies from place to place, can you tell me what state this is in?

California

Lawyer's Assistant: What documents or supporting evidence do you have?

Working to get 3 opinion letters from local realtors, only have online estimates from Zillow, etc.

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Answered in 1 minute by:
3/8/2018
Richard
Richard, Attorney
Category: Estate Law
Satisfied Customers: 56,560
Experience: 29 years of experience practicing law, including tax and estate planning.
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Hi! My name is Richard & I will be helping you today! It will take me a few minutes to type a response to your question. Thanks for your patience!

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Good morning. There would be a gift in the amount of the excess, but even if the gift amount exceeds the $15,000 annual gift exclusion amount, there will be no gift or income tax implications to either your wife or the sister in law. First, pursuant to Section 102 of the Internal Revenue Code, gifts are not income and thus do not need to be reported on the income tax return. There should be no gift tax consequences. Recipients of gifts are not subject to gift tax. And, there should also be no gift tax due from the donor. Each donor can give $14,000 ($15,000 in 2018) per year per person under the annual gift exclusion. In addition to that, for any amounts in excess of the $14,000/$15,000 in a year, each person has a $5,490,000 lifetime exemption ($11,200,000 in 2018)....which means a person can give a cumulative amount of up to $5,490,000 ($11,200,000 in 2018) in gifts over and above the $14,000/$15,000 annual gift exclusion amount 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 additional gifts have exceeded the $5,490,000 ($11,200,000 in 2018).

Thank you so much for allowing me to help you with your question. I have done my best to provide information which fully addresses your question. If you have any follow up questions, please ask! If I have fully answered your question(s) to your satisfaction, I would appreciate you rating my service as Good or Excellent (i.e., 4 or 5 stars)(hopefully Excellent/5 stars!). Otherwise, I receive no credit for assisting you today. I thank you in advance for taking the time to provide me a positive rating!

Richard
Richard, Attorney
Category: Estate Law
Satisfied Customers: 56,560
Experience: 29 years of experience practicing law, including tax and estate planning.
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Customer reply replied 1 month ago
OK, I'm good with your answer on the Gift Tax.
What, if any IRS forms have to be filed? I know each estate can be a special case, but here is our situation: All of the Mother-in-law's assets were held in a revocable living trust and her 2 daughters were the only beneficiaries, 50/50. No executor named, the beneficiaries are to divide the assets equally. Assets include bank savings accounts and real estate, nothing complicated.

Thank you for the 4-star rating. I know rating takes an additional step and I truly appreciate you taking the extra time. It's been my honor and privilege to help you with this. If I can help you in any way in the future, I'll be happy to help. For easy access, my bookmark is: www.justanswer.com/law/expert-legalbeacon/ . Or, simply request “Richard only” in the first line of your question.

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Customer reply replied 1 month ago
You didn't answer my last question regarding the IRS forms

Sorry for the delay, your other question just popped up. No estate tax return would be necessary. If the gift portion exceeds $15,000, a gift tax return should be filed by the sister in law (Form 709). And, to the extent the trust has any income in excess of $600 prior to distribution of assets, the trust will need to file an income tax return (Form 1041).

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Customer reply replied 1 month ago
OK, thanks.

My pleasure to help!

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Richard
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