Real Estate Tax

[cbess53]

What is the name of your state (only U.S. law)? New York


Hello,

My family recently sold a home in New York and from it being split up among my family I received $140,000. I put the money in a joint bank account with my son.

Now we are looking to buy a home my son is going to have the mortgage under his name since he has stellar credit. Now, my name will be on the title of the house along with his. My question is that since both of our names are on title of the house will I have to pay any sort of gift tax?

Thank you!

 

[aldaron]

I wish I had your problem lol. You need an accountant not a lawyer.

 

[davew128]

I wish I had your problem lol. You need an accountant not a lawyer.

More lawyers do gift tax returns than accountants lol.

 

[aldaron]

Lawyers are good at math?

 

[anteater]

Lawyers are good at math?

Lawyers need the money more!

 

[LdiJ]

What is the name of your state (only U.S. law)? New York


Hello,

My family recently sold a home in New York and from it being split up among my family I received $140,000. I put the money in a joint bank account with my son.

Now we are looking to buy a home my son is going to have the mortgage under his name since he has stellar credit. Now, my name will be on the title of the house along with his. My question is that since both of our names are on title of the house will I have to pay any sort of gift tax?

Thank you!

No, you would not have to pay any gift tax nor would this be considered a "gift" as you both would be owners of the home.

 

[tranquility]

I don't think I'm understanding. There may be more issues here now or someday.

What happened to the cash which was put in the account? How was that account titled? Was it used to purchase the house? How is the loan to be paid? How big is the loan as compared to the total price of the house?

At the very least, we have to deal with the $140K, right?

 

[davew128]

Lawyers are good at math?

Since the only math on a gift tax return is arithmetic...

 

[LdiJ]

I don't think I'm understanding. There may be more issues here now or someday.

What happened to the cash which was put in the account? How was that account titled? Was it used to purchase the house? How is the loan to be paid? How big is the loan as compared to the total price of the house?

At the very least, we have to deal with the $140K, right?

Dad/Mom is making the down payment, the mortgage is in the son's name. They will be both be on the deed. I kind of doubt that Dad/Mom is putting down more than 50% of the cost of the home or Dad/Mom not having good credit wouldn't be an issue. Therefore I don't see any gift involved.

 

[tranquility]

No gift? So, if a rich person wants to buy a house with their child, I don't know, say a $1million dollar house. They put up $400K and put their child's name jointly on the title.

There's just been a gift of $200K there. (In our case $70K) If not, the Estate and Gift tax has just been eliminated. By such property manipulation, any amount can be transferred to others without taxation.

Again, what am I missing?

 

[davew128]

No gift? So, if a rich person wants to buy a house with their child, I don't know, say a $1million dollar house. They put up $400K and put their child's name jointly on the title.

There's just been a gift of $200K there. (In our case $70K) If not, the Estate and Gift tax has just been eliminated. By such property manipulation, any amount can be transferred to others without taxation.

Again, what am I missing?

Its not a completed gift. Child does not now 50% of the property. Child cannot unilaterally take ownership of the property or sell his or her interest. Joint ownership in and of itself does not constitute a gift.

 

[anteater]

...Child does not now [own?] 50% of the property. Child cannot... sell his or her interest.

Why not???

 

[tranquility]

I agree with anteater the key question here is if the OP can defease the interest.

At the common law, one could only break a JTWROS by the fiction of a straw sale. For reasons we won't get into here, the straw sale would recreate the tenancy without the right of survivorship as the entities were not there at the creation of the tenancy and the Joint was translated into a tenants in common.

Modernly, this can still break the tenancy. In New York, I believe one can also break one by signing a form. The fact the parties can break the JTWROS make the gift completed at any time.

The reason for the belief the joint tenant has not received a gift, is from bank accounts where the owner gives withdrawal rights to another. There, the gift is completed on withdrawal and the original owner cannot take that money back. Here, we're already there.

If we look to the instructions of the 709 regarding joint property, we see in part:

Joint Tenancy
If you buy property with your own funds
and the title to the property is held by
yourself and a donee as joint tenants with
right of survivorship and if either you or
the donee may give up those rights by
severing your interest, you have made a
gift to the donee in the amount of half the
value of the property.

 

[LdiJ]

I agree with anteater the key question here is if the OP can defease the interest.

At the common law, one could only break a JTWROS by the fiction of a straw sale. For reasons we won't get into here, the straw sale would recreate the tenancy without the right of survivorship as the entities were not there at the creation of the tenancy and the Joint was translated into a tenants in common.

Modernly, this can still break the tenancy. In New York, I believe one can also break one by signing a form. The fact the parties can break the JTWROS make the gift completed at any time.

The reason for the belief the joint tenant has not received a gift, is from bank accounts where the owner gives withdrawal rights to another. There, the gift is completed on withdrawal and the original owner cannot take that money back. Here, we're already there.

If we look to the instructions of the 709 regarding joint property, we see in part:

However that is not what is happening here. The OP is putting down the down payment, but the son is going to be responsible for the mortgage. In addition, for all we know its going to be solely the OP's home, with the son remaining on the deed only until the mortgage is paid off.

In any case, I don't see this as a completed gift because ownership of the home is contingent on the mortgage.

 

[tranquility]

In any case, I don't see this as a completed gift because ownership of the home is contingent on the mortgage.

The ownership is in no way, not a chance, not even close, "contingent" on the mortgage. Even in title states (Trust deeds and not mortgages.), all beneficial ownership is held by the purchasers and there would be nothing contingent. Even if the statement were correct, using the term "contingent" makes it seem there is some future interest here. A gift tax return is required for a gift of a future interest, no matter the size.

In addition, for all we know its going to be solely the OP's home, with the son remaining on the deed only until the mortgage is paid off.

If the property reverts to OP when the mortgage is paid off, I'd agree there was not a completed gift. How can we make that happen in our facts?

This is a done deal and the son can sell his portion. There is no defeasement possible. A gift tax return would be required.