Gift of 100,000 for each of 4 children from sale of family home

[phaila]

Maryland GIFTING to Pennsylvania:

My friends Father who died from cancer wanted his house to be sold and divided between his children when his wife, their Mother, either died or sold the house. She is planning on selling the house and wants to give each child their share of their "Inheritence". I have 3 questions.
1. Can it be considered and inheritence if their Mother is still alive when she sells it and what would the tax be on 100,000 inheritence
2. If it will have to be considered a gift for each child and each ones share is 100,000 what would the tax be on that money?
3. And will she be paying an income tax on it when it sells anyhow even if she will be giving it ALL away to her 4 children. Because then the money for the house will be taxed 2 full times and that really does not seem right.(she has owned the home for 35 years)
Thank you!
Vicki

[freespeech]

Usually, she as a single individual can exclude up to 250K of the gain on the sale of her principal residence if she has lived there 2 out of the last 5 years. If the gain is more than that then she will have to pay taxes on the rest of the gain.

To answer the tax question on the Gifts, that is what it would be at that point, one must know what her entire estate is worth.

Have they consulted an Estate Planning Atty to have them go over all the actual figures and help them do this with the least amount of taxes being paid? Well worth the price of a consult in this case.

[anteater]

Assuming that Mother is now the owner of the house:

1) No

2) Depends on any other gifts Mother has made in her lifetime and what her remaining estate looks like. She will have to file a gift tax return.

[url]http://www.irs.gov/pub/irs-pdf/p950.pdf[/url]

3) Selling the house and gifting the money are two separate transactions. What Mother does with the money after she sells does not affect income tax. Whether she has to pay a capital gains tax on the sales depends on a lot of things that you did not include, like the cost basis. She will be able to exclude the first $250,000 of capital gains for federal purposes. Don't know MD income tax law, but many states exclude gain on sale of a residence entirely.

[phaila]

Originally Posted by anteater

Assuming that Mother is now the owner of the house:

1) No

2) Depends on any other gifts Mother has made in her lifetime and what her remaining estate looks like. She will have to file a gift tax return.

[url]http://www.irs.gov/pub/irs-pdf/p950.pdf[/url]

3) Selling the house and gifting the money are two separate transactions. What Mother does with the money after she sells does not affect income tax. Whether she has to pay a capital gains tax on the sales depends on a lot of things that you did not include, like the cost basis. She will be able to exclude the first $250,000 of capital gains for federal purposes. Don't know MD income tax law, but many states exclude gain on sale of a residence entirely.

I am just wondering does the Mother pay the gift tax AND the child also has to pay taxes on his gift ??? What are taxes usually on GIVING monetary gifts (she is not dividing up her whole estate just giving her children the money from the sale of her only residence) And do you pay normal income taxes on a family Monetary gift OR is there some special "Received a money gift tax?"
Thank you again!

[anteater]

Originally Posted by phaila

I am just wondering does the Mother pay the gift tax AND the child also has to pay taxes on his gift ??? What are taxes usually on GIVING monetary gifts (she is not dividing up her whole estate just giving her children the money from the sale of her only residence) And do you pay normal income taxes on a family Monetary gift OR is there some special "Received a money gift tax?"
Thank you again!

The person making the gift is responsible for reporting the gift and paying any applicable taxes. Receivers of gifts have no income tax liabilities or obligations resulting from receiving the gift.

There may well be no taxes resulting from the gift. Read Publication 950.