How to avoid Gift Tax

[rroubaix]

What is the name of your state? Colorado

I would like to transfer some assets to my daughter, but am told that any gift over 10,000 will be taxed at 46%. My question is this: could I buy my daughter's house from her (essentially, pay off her mortgage), rent it back to her for a nominal amount, and then leave it to her in my will? Thanks for the advice.What is the name of your state?

[xylene]

Originally Posted by rroubaix

but am told that any gift over 10,000 will be taxed at 46%.

By whom? Really, who told you this? Try looking at the IRS website for several publications on this subject. They range in complexity from basic to every conceivable situation.

For starters it 11,000 dollars per person (whom you are giving to) per year The person does not need to be a relation. If your daughter was married you could give her husband 11,000 for a combined total of 22,000 per year.

Now you also have a LIFETIME exemption of 1,000,000 in gifts, SEPERATE from your 11,000 per year per person exemption. You can make as many gifts as you like, exempt gift tax so long as you they total no more than 11,000 per person per year. If you make gifts over that you will be using up your lifetime exemption.

So you could give your daughter 1,000,000 in assets ONCE and her hubby 11,000 and 11,000 to as many other people you wanted per year. And the year after that you could give her 11,000 and so on.

So are you planning to make a gift over 1 Million?

Now, if you buy your daughters house you would pay taxes, fees etc.

It is also very convoluted and risky. Tax laws change. Are you ill? (I hope you are not going to die very soon.) Even if you were why make it so complex.

If you have more money than a million in assets to give before you die, you need to talk to a financial tax and estate planner. You might want too anyway.

If not, don't worry; make your daughter happy, its not complicated.

[anteater]

Originally Posted by rroubaix

What is the name of your state? Colorado

I would like to transfer some assets to my daughter, but am told that any gift over 10,000 will be taxed at 46%. My question is this: could I buy my daughter's house from her (essentially, pay off her mortgage), rent it back to her for a nominal amount, and then leave it to her in my will? Thanks for the advice.What is the name of your state?

Ya know, that A.M. Told fella sure does give out a lot of half-baked advice. Almost as bad as his sister, I. Was Told.

The annual gift exclusion is now up to $12,000 per person.

[Snipes5]

Please get competent advice from a professional in your area. It is almost always better to let your heirs inherit than to gift them property now.

And it IS true that you can gift up to one million without paying any taxes, but you DO have to file a gift return for any gift given to an individual that is in excess of $12000.

It is so much fun when people go on rants without giving ALL the necessary information.

I love where the poster says, "it is convoluted and risky", and then says, "it's not complicated". So which is it, convoluted or not?

It isn't necessarily difficult to do, but it IS easy to do it incorrectly, especially if you listen to all the dolts around you who will have opinions on the subject.

My advice would be to pay a few bucks for professional estate planning advice.

Snipes

[xylene]

Originally Posted by Snipes5

Please get competent advice from a professional in your area. It is almost always better to let your heirs inherit than to gift them property now.

Almost always better? OK.

And it IS true that you can gift up to one million without paying any taxes, but you DO have to file a gift return for any gift given to an individual that is in excess of $12000.

The OP's concern was paying a gift tax at 46% over 10,000. Bringing up filing is a red herring.

It is so much fun when people go on rants without giving ALL the necessary information.

Like your first statement.

I love where the poster says, "it is convoluted and risky", and then says, "it's not complicated". So which is it, convoluted or not?

You seem to have difficulty holding multiple concepts in mind on distinct subject. That's your problem not mine. Do you disagree that the OP's plan to buy their daughters house is convoluted (involves unneeded steps) and risky (payment of taxes and estate issues)?

Do you also disagree that seeing a proffessions and most importantly doing what they want to do (make a gift to their daughter while alive) is not complicated?

Are you confused how two different things can have different properties?

It isn't necessarily difficult to do, but it IS easy to do it incorrectly, especially if you listen to all the dolts around you who will have opinions on the subject.

My advice would be to pay a few bucks for professional estate planning advice.

Snipes

My advice to the OP was read an IRS publication and ideally see an proffesional before assuming it would be a good idea to buy your daughters house and rent it back to them with the goal of avoiding taxes...

And yes I appreciate the correction on the 2006 exemption. But it only bolsters my point that worrying about gift tax is less of an issue than coming up with an elaborate property scheme.

[Snipes5]

Perhaps, but this is the Tax Law forum, and we answer Tax Law Questions.

The reason "filing" might be germane to a discussion of gift tax and credit is because a person giving a gift of that nature would be required to file a gift return.

If you read the archives of this particular forum you will see that "gift tax" as an issue is discussed on an average of once a week, and the main problem people seem to have is wrapping their brains around the idea that a return must usually be filed, but no tax paid.

[xylene]

Originally Posted by Snipes5

If you read the archives of this particular forum you will see that "gift tax" as an issue is discussed on an average of once a week, and the main problem people seem to have is wrapping their brains around the idea that a return must usually be filed, but no tax paid.

Point extremely well taken.

Thank you.