Can I avoid property gain import tax?
I have a second home which is a rental property that I own owned for 34 years now. I purchased it for $11000 and in a minute its worth close to $300000. My son lives in the home and have been renting it for the later 4 years. He's interested in owning a home and I'm trying to avoid property gain taxes. Is it possible for me to give the home as a grant to my son? He's going to live there for another 3 years. I comprehend that the property gains due will be transferred to him but can he avoid it by living in the home for the three years? Are in that any other options below our current situation?
Answers: Let's see.
You gift the house to your son. You use up $300,000 - $12,000 of your lifetime gifts of $1M. If this is your first contribution, you logically owe (but do not pay) gift taxes of of $55,800. (When you die, the taxable gifts you give during your lifetime are included in your estate, so you will hold used up some of your estate exclusion.)
Your son's basis is your spring plus most of the gift charge calculated above. If he lives there 2 years, yes he can exclude most of the gain. (He can't exclude the depreciation you claimed--or should enjoy claimed--while he was living within it. That gets recapture at up to 25%.)
I am assuming that you have be renting it to him at FMV and reporting that income properly.
I'd take this one to a CPA - hang around until after tax season, they are rather busy now. There could be lots of issues involved here, and you don't want to engender a mistake.
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Answers: Let's see.
You gift the house to your son. You use up $300,000 - $12,000 of your lifetime gifts of $1M. If this is your first contribution, you logically owe (but do not pay) gift taxes of of $55,800. (When you die, the taxable gifts you give during your lifetime are included in your estate, so you will hold used up some of your estate exclusion.)
Your son's basis is your spring plus most of the gift charge calculated above. If he lives there 2 years, yes he can exclude most of the gain. (He can't exclude the depreciation you claimed--or should enjoy claimed--while he was living within it. That gets recapture at up to 25%.)
I am assuming that you have be renting it to him at FMV and reporting that income properly.
I'd take this one to a CPA - hang around until after tax season, they are rather busy now. There could be lots of issues involved here, and you don't want to engender a mistake.