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I may have made a mistake. I gave my house to my daughter…

Customer Question
I may have made...

I may have made a mistake. I gave my house to my daughter with lifetime agreement to live here and pay taxes and ins. I lost my homestead exemption and I did not consider gift tax. can I or should I reverse that decision and take back my house. I wanted to gift my assets while still living to avoid conflict when I die. my plan was to buy my son an equal property.

Accountant's Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?

Only that I have in mind to buy my son a property of about 250 thousand. is this a bad plan tax wise.

Submitted: 5 months ago.Category: Tax
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Answered in 1 minute by:
11/15/2017
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 5 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,997
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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HI, MY NAME’S LANE - I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice 1986.

If you’ll please bear with me for a minute I’ll type up my initial response, and then we can go from there if you have further questions on this.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 5 months ago

Likely not. At least not for gift tax purposes.

...

The lifetime exemption for the gift and estate tax is $5,490,000 for someone dying in 2017. The gift tax and the estate tax are part of a unified system ... meaning that If you give away, say 3,000,000 during life, you can still leave 2,490,000 without incurring an estate tax.

...

However, for purposes of any eventual sale by those that you gift assets, you ARE increasing their taxable capital gain.

...

Capital gain = sales price - basis

...

Basis is normally your purchase price plus any improvements to the asset (what you have IN the property)

...

But gifts have what's called "carry-over basis." The basis of the giver carries over to the gift recipient. ... So their capital gain will be their sales price minus YOUR basis.

...

However, if assets are INHERITED the heirs receive what's called a step-up in basis ... (to the fair market value of the asset on the date of your death) ... meaning that they could sell fairly quickly (within a year or so, before prices have risen) and have no taxable gain at alll.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 5 months ago

Your daughter CAN give back the house (use a quit-claim deed to re-title the house to you). Then, as long as you live in the home as your primary residence the homestead exemption will then apply.

...

Please let me know if you have ANY questions at all, before rating me.

If this has helped, and you DON’T have other questions … I'd appreciate a positive rating, using the stars on your screen, and then clicking “submit" – That’s the only way I’ll be credited for the work.

...

But again, if you need more on this, please let me know.

Lane

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Category: Tax
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