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Phillip B, EA
Phillip B, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 704
Experience:  Practicing since 2004. Expert in 1040, small business, represent vs. IRS, & int'l tax mattters.
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My parent want to give a rental property to my sister and her

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My parent want to give a rental property to my sister and her husband and my wife and myself. Four people total. What is the best way to do this to avoid gift tax. Because of the value exceding the gift tax threshold. We were going to receive the property over the course of two tax years. Can we do this?
The four getting the property will be placing the property in an LLC. Does the property have to be titled in each of our names and then retitled in the name of the LLC or can it go directly into the LLC. What happens the 1st year when part of the property is in the LLC and part is still owned by my parents.

Thanks for choosing! I will do my best to provide you with a clear and concise answer to your tax question based on the information that you have provided me.

There is no problem with your parents gifting a portion of the rental property per year in order to avoid gift tax issues. Remember each one of your parents can give 14,000 dollars a year to each person. Therefore, they can give 56,000 dollars to each couple each year.

You could do the LLC they way you mentioned, and the first year your parents would report their portion of the LLC on their form 1040 and the rest of the rental profits would be reported on the form 1065 for the LLC. Title should go to the gift recipients first, then the gift recipients would transfer title to the LLC.

If I were planning the LLC situation out, I would probably have your parents title the property in the LLC before they start giving the rental property. Then they would simply give each of you membership shares of the rental property each year until the rental property LLC is fully distributed and then the rental property would be reported in full through the form 1065 for the LLC. However, either way would be fine.

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