Investor · Chula Vista, CA · Member since 2019 · 51 posts · 21 votes
BP,
I thought I had this all thought out but I found out that I know nothing like John Snow :-D.
Soooo... my Mom agreed to give me and my brothers her 1st home, which is paid off. Intent is to pay her $100k by using the equity to flip or make deals to total $100k for her golden years within 1-2 years. I have one brother still living in the home and will continue making payments to my Mom until we get the $100k.
She was informed by our CPA that their is a gift tax if she just gives us the home.
What are some ideas from you savvy investors to acquire the property without too much of a negative tax hit? Keeping in mind the end goal after we acquire the home.
Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
6y
How many brothers do you have?
The Annual Gift Tax Exclusion. The annual gift tax exclusion is $15,000 for the 2019 tax year. (It was the same for the 2018 tax year.) This is the amount of money that you can give as a gift to one person, in any given year, without having to pay any gift tax.
So she can gift each of you $15k a year. She can also gift each of your kids $15k a year. Your kids can gift that back to you, your brother's kids can gift theirs back to your brothers. Same for spouses. Have mom gift you'al in equal shares this Christmas, then again on New Year's Day and you likely have the value of a house, and if not, have her gift the rest in 2021.
File a new deed showing the new ownership mix by percentage.
Then you'al each can gift $15k back to mom until she has $100k minus the rent gifted to her.
Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
6y
How many brothers do you have?
The Annual Gift Tax Exclusion. The annual gift tax exclusion is $15,000 for the 2019 tax year. (It was the same for the 2018 tax year.) This is the amount of money that you can give as a gift to one person, in any given year, without having to pay any gift tax.
So she can gift each of you $15k a year. She can also gift each of your kids $15k a year. Your kids can gift that back to you, your brother's kids can gift theirs back to your brothers. Same for spouses. Have mom gift you'al in equal shares this Christmas, then again on New Year's Day and you likely have the value of a house, and if not, have her gift the rest in 2021.
File a new deed showing the new ownership mix by percentage.
Then you'al each can gift $15k back to mom until she has $100k minus the rent gifted to her.
Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
6y
Oh, forgot to say, fill out the assessor's paperwork when you do this deed and if all of the deed transfer is within parent to child family there should not be a reassessment for CA property taxes. This is a BIG deal in CA. If you have spouses on the deed they will reassess. The form is usually in a display are the recorder's office.
The Annual Gift Tax Exclusion. The annual gift tax exclusion is $15,000 for the 2019 tax year. (It was the same for the 2018 tax year.) This is the amount of money that you can give as a gift to one person, in any given year, without having to pay any gift tax.
So she can gift each of you $15k a year. She can also gift each of your kids $15k a year. Your kids can gift that back to you, your brother's kids can gift theirs back to your brothers. Same for spouses. Have mom gift you'al in equal shares this Christmas, then again on New Year's Day and you likely have the value of a house, and if not, have her gift the rest in 2021.
File a new deed showing the new ownership mix by percentage.
Then you'al each can gift $15k back to mom until she has $100k minus the rent gifted to her.
Wow. This indeed is very savvy THANKS for the input. I’ll look into the second response u posted for GA since she and my brothers are all there.
Rental Property Investor · Williamson, GA · Member since 2018 · 78 posts · 35 votes
6y
@Joseph Bagley I'd also like to add to this. My grandmother is the most fiscally minded person I know and instead of giving out her full inheritance she used the gift allowance to divide out her liquid assets over the last few years. She has not only been giving out gifts to her two children but her five grandchildren, as well as all of our spouses. Basically, I get a check and so does my wife. I'm not a financial planner or a Tax Advisor so I would get a professional opinion but, this may allow her to divvy out all of the capital between Christmas and New Year's in 1 swing.
Financial Advisor · Blaine, MN · Member since 2014 · 478 posts · 387 votes
6y
@Joseph Bagley I think there has been a miscommunication between the CPA and your mother and you. If she gives above the $15,000 point it DOES NOT mean you or her owe anything in gift taxes. It simply means she would have to file a gift tax return (which is not typically a big deal). The lifetime gift and estate tax exclusion is over $10,000,000 so, unless she's over ten million dollars gift taxes don't come into the picture.
Where I would suspect taxes become an issue is upon the sale of the property.
When you gift property the basis of the person making the gift transfers to the person receiving the gift... So, if she bought the property a long time ago and there has been a significant amount value appreciation and tax depreciation I would expect a rather large tax bill upon the sale of the property. Make sure you talk through the details of this with a good CPA that understands real estate...preferably one that works with investors or invests himself.