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Age 59 and my residence is VA. Mother-in-law owns $225,000

Hi Pearl. My name...
Hi Pearl. My name is***** age 59 and my residence is VA. Mother-in-law owns $225,000 house and has put it in her will that my wife and I are to inherit it. She is considering it be put into our name but I've heard there are different avenues that we could benefit by. We don't ever plan to sell it as we are missionaries in another country and use it when we come back to the states every couple of years. Can you put me in the right direction? We are happy to pay for planning this as well as our taxes. Thank you.
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Answered in 5 minutes by:
9/19/2017
Richard
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 56,009
Experience: 29 years of experience as a tax, real estate, and business attorney.
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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 afternoon. Can you tell me whether or not the property has appreciate substantially since your mother in law purchased it? Thanks.

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Customer reply replied 3 months ago
Hi Richard. My apology. I thought I was chatting with "Pearl". In-laws built it in 1985 or so, for $75,000. Its market value is now about $225,000.
Customer reply replied 3 months ago
I'm unable to talk out loud as I am at her house with her and rather not her hear this conversation yet as she is a worry wart...

Thanks for following up. The key is to get the step up in basis to its fair market value. You can do this in one of two ways: i) she can transfer it to you now but retain a life estate; or ii) she can wait and give it to you at her death. Either way, at her death, the basis is adjusted to its fair market value so that you would only have gain on sale to the extent of appreciation after her death.

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!

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Customer reply replied 3 months ago
I'm aware of that step up in basis rule. For my tax purpose presently, is there a federal tax burden for my current year tax if it is signed over to us now with retaining a life estate?

Thanks for following up. No, there would be no tax issues for either of you. This would simply be a gift of a remainder interest. 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 per year per person under the annual gift exclusion. In addition to that, for any amounts in excess of the $14,000 in a year, each person has a $5,490,000 lifetime exemption....which means a person can give a cumulative amount of up to $5,490,000 in gifts over and above the $14,000 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.

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Customer reply replied 3 months ago
This is the way I personally think is best to go. You have clarified that with me by your answer. With this information, do I arrange this through a real estate lawyer, or tax accountant? . Thank you

You're very welcome. A real estate lawyer would be the proper attorney to help you with this.

Richard
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 56,009
Experience: 29 years of experience as a tax, real estate, and business attorney.
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Customer reply replied 3 months ago
Well, thank you kindly Richard. I will rate you the best. Very Cordially, Bob

My pleasure to help. 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.

Thank you so much for the 5-star rating! I know rating takes an additional step and I truly appreciate you taking the extra time!

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Richard
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