In California, looking to see the best way to gift a rental property to a child and best way for both parties to avoid as much tax as possible.

In California, looking to see the best way to gift a rental property to a child and best way for both parties to avoid as much tax as possible.

@Jonathan WhiteThe great thing about Alaska is that the state has no income tax.

In order to determine if a house is a good investment or not, we created a spreadsheet that incorporates the recapture tax as part of the calculations. 

Anything over $400K is taxed at 39.6%, which is the highest tax bracket.You can see the details here:http://taxes.about.com/od/Federal-Income-Taxes/qt/Tax-Rates-For-The-2013-Tax-Year.htmOn top of that you will likely pay 15.3% in self-employment tax, as Steven mentioned...

@Paul RyanGoing to try and answer to the best of my ability but I am not a cpa or a lawyer and can’t give legal or tax advice.Typically you are not able to offset the depreciation recapture tax.

Also, since the real estate is held within the Roth account and has already been taxed, I am not sure you need to take 25% off the net rents for income tax as long as it stays within the Roth (though don't quote me on that, haha).Regarding your underlying assumptions.

This income will be subject to SE Tax.

This type of transaction pushes off the capital gains tax as the money is reinvested into a similar property (i.e. another commercial property).

regular MLS Can you post all your numbers e.g. total purchase price as per your closing statement, cost to add the ADU, mortgage payment principal and interest, rental income from the ADU, are you renting the house and ADU, or are you living in the house, property taxes, insurance, did the county increase your property tax as a result of adding the ADI and how much, etc.?