My brother and I plan on selling our property that only I have been living in for 2 years (I pay him $600/mo for rent. My brother lives in his primary). On title, He owns 25% and I own 75%.
For him to avoid capital gain tax, should he gift me the property? Or can I remove his name from the title? I would then use the funds for another property 1 year from now and add him on that title as a certain % owner.
or
Should he just pay capital gains tax on about $50k?
Rental Property Investor · Denver · Member since 2020 · 80 posts · 33 votes
4y
I would always avoid taxes for as long as possible. And real estate makes that happen. It depends on how your brother feels about it. Is he willing to do that? If so, go for it. If not, option would be to sell.
You make no sense in most cases. Gifts above a certain amount (circa $15,000) are taxable to you (the recipient) as ordinary income, which I suspect is more than 15 percent -- with, of course the deductible of said $15k. Offset that with whatever deduction your brother might be able to make from the gift (above the self-same $15,000).
Long term capital gains tax is what, 15 percent? Which can be offset by long term capital losses.
You cannot focus on just one tax. You have to look at all potential taxes and plan accordingly.
Are you referring to the annual gift exclusion? My understanding is that gifts are never subject to income tax. The person giving the gift ("Donor") will have to file a Form 709 in the event that he/she gifted more than the annual exclusion to that recipient ("Donee"). If the gift has excluded the Donor's lifetime exemption then the Donor will be subject to gift/estate tax on that excess. Single filer's lifetime exemption for 2021 was $11.7 million.
@Jake Paul Interesting scenario. Has your brother been reporting his 25% interest as rental property and the $600/month as rental income offsetting with relevant deductions such as mortgage interest (if any), property taxes, maintenance, HOA, depreciation, etc.? He can gift you his 25% but you'll be the one subject for the gains on that later... Your plan is for him to gift it to you and you promise him a percentage of your next property as proceeds?......