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Trying to understand the gift tax law. My parents own a home…

Trying to understand the...

Trying to understand the gift tax law

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

My parents own a home I and my wife and 4 children are living in

Accountant's Assistant: Is there anything else important you think the Accountant should know?

Is there a way to avoid paying gift tax

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Answered in 5 minutes by:
3/28/2018
Richard
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 56,597
Experience: 29 years of experience as a tax, real estate, and business attorney.
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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).

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Customer reply replied 29 days ago
Just want to clarify that the scenario would be that my parents gift me and my wife and kids the house worth say 350000 this year, for free, they don't have to pay any gift tax? what if they sell it for 1$? And if they sell it to us for $250,000 (originally paid 305k) are there tax implications for that scenario?

That is correct. There would be no gift tax unless they were to each make gifts in excess of: i) $15,000/donee; plus ii) $11,200,000. If the house is worth $350,000 and they sell it for $1, the gift would be $349,000 (value over sale price). If they sell it for $250,000, the gift amount would be $100,000. In neither case would there be any gift tax consequences to either you or the parents.

Richard
Richard, Tax Attorney
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Satisfied Customers: 56,597
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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! 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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