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Parents gifting property to son and wife

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Grahajp

Junior Member
What is the name of your state (only U.S. law)? Oklahoma
My parents own a piece of property in an RV park valued at $50 to 55k. They want to give this property to me and my wife. I don't understand all of the gift tax laws, but do know that they can give collectively $26k per yr, per individual. That said, can they give me 26k and my wife 26k, which is the approx value of the property without getting hit for a gift tax penalty?
 


curb1

Senior Member
They will not be "hit with a gift tax" in any case unless they have substantial other assets.

"Why it pays to understand the federal gift tax law
If you give people a lot of money or property, you might have to pay a federal gift tax. But most gifts are not subject to the gift tax. For instance, you can give up to the annual exclusion amount ($13,000 in 2009 and 2010) to any number of people every year, without facing any gift taxes. Recipients never owe income tax on the gifts."

"And you can give up to $1 million in gifts that exceed the annual limit—total—in your lifetime, before you start owing the gift tax. If you give $15,000 each to ten people in 2009, for example, you'd use up $20,000 of your $1 million lifetime tax-free limit—ten times the $2,000 by which your $13,000 gifts exceeds the $12,000 per-person annual gift-free amount for 2009."

"The general theory behind the gift tax
The federal gift tax exists for one reason: to prevent citizens from avoiding the federal estate tax by giving away their money before they die."

"The gift tax is perhaps the most misunderstood of all taxes. When it comes into play, this tax is owed by the giver of the gift, not the recipient. You probably have never paid it and probably will never have to. The law completely ignores gifts of up to $13,000 per person, per year, that you give to any number of individuals. (You and your spouse together can give up to $26,000 per person, per year to any number of individuals.)"

"If you have 1,000 friends on whom you wish to bestow $13,000 each, you can give away $13 million a year without even having to fill out a federal gift-tax form. That $13 million would be out of your estate for good. But if you made the $13 million in bequests via your will, the money would be part of your taxable estate and would trigger an enormous tax bill."
 

Zigner

Senior Member, Non-Attorney
Curb - your cut/paste (uncredited) is wrong.

The $1,000,000 lifetime exclusion is TOTAL, not after the annual amounts.


They will not be "hit with a gift tax" in any case unless they have substantial other assets.

"Why it pays to understand the federal gift tax law
If you give people a lot of money or property, you might have to pay a federal gift tax. But most gifts are not subject to the gift tax. For instance, you can give up to the annual exclusion amount ($13,000 in 2009 and 2010) to any number of people every year, without facing any gift taxes. Recipients never owe income tax on the gifts."

"And you can give up to $1 million in gifts that exceed the annual limit—total—in your lifetime, before you start owing the gift tax. If you give $15,000 each to ten people in 2009, for example, you'd use up $20,000 of your $1 million lifetime tax-free limit—ten times the $2,000 by which your $13,000 gifts exceeds the $12,000 per-person annual gift-free amount for 2009."

"The general theory behind the gift tax
The federal gift tax exists for one reason: to prevent citizens from avoiding the federal estate tax by giving away their money before they die."

"The gift tax is perhaps the most misunderstood of all taxes. When it comes into play, this tax is owed by the giver of the gift, not the recipient. You probably have never paid it and probably will never have to. The law completely ignores gifts of up to $13,000 per person, per year, that you give to any number of individuals. (You and your spouse together can give up to $26,000 per person, per year to any number of individuals.)"

"If you have 1,000 friends on whom you wish to bestow $13,000 each, you can give away $13 million a year without even having to fill out a federal gift-tax form. That $13 million would be out of your estate for good. But if you made the $13 million in bequests via your will, the money would be part of your taxable estate and would trigger an enormous tax bill."
 

anteater

Senior Member
Curb - your cut/paste (uncredited) is wrong.

The $1,000,000 lifetime exclusion is TOTAL, not after the annual amounts.
Sorry, Zig, but Curb is right. The annual exclusion amounts are subtracted from the total gifts to compute the reportable gifts. Only the reportable gifts are applied against the $1 million lifetime exclusion.

Or more accurately, the tax that would be due on the reportable gifts is applied against the credit for the gift tax that would be due on the first $1 million of reportable gifts.
 

Kiawah

Senior Member
Back to the original question, as I've often wondered this as well.....

Could parents who jointly own property, give that property in a single transaction to their son and daughter-in-law as a jointly deeded property, assuming that the value of the property was $52K, and not trigger the need for gift tax form 709 reporting?


Personally, I have always done 4 singular 13K transactions (person to person), to keep documentation auditable and clear cut. With cash or stock transactions, that is easier to do.


With a jointly owned real estate transaction, is it a potential audit problem? Or, is there backup paperwork that should be kept to support that it was effectively gifting under the 13K limits?
 
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sam02135

Member
They will not be "hit with a gift tax" in any case unless they have substantial other assets.

"Why it pays to understand the federal gift tax law
If you give people a lot of money or property, you might have to pay a federal gift tax. But most gifts are not subject to the gift tax. For instance, you can give up to the annual exclusion amount ($13,000 in 2009 and 2010) to any number of people every year, without facing any gift taxes. Recipients never owe income tax on the gifts."

And the maximum that you can give in your life time without gift taxes is $1Million dollars.

"And you can give up to $1 million in gifts that exceed the annual limit—total—in your lifetime, before you start owing the gift tax. If you give $15,000 each to ten people in 2009, for example, you'd use up $20,000 of your $1 million lifetime tax-free limit—ten times the $2,000 by which your $13,000 gifts exceeds the $12,000 per-person annual gift-free amount for 2009."

"The general theory behind the gift tax
The federal gift tax exists for one reason: to prevent citizens from avoiding the federal estate tax by giving away their money before they die."

"The gift tax is perhaps the most misunderstood of all taxes. When it comes into play, this tax is owed by the giver of the gift, not the recipient. You probably have never paid it and probably will never have to. The law completely ignores gifts of up to $13,000 per person, per year, that you give to any number of individuals. (You and your spouse together can give up to $26,000 per person, per year to any number of individuals.)"

"If you have 1,000 friends on whom you wish to bestow $13,000 each, you can give away $13 million a year without even having to fill out a federal gift-tax form. That $13 million would be out of your estate for good. But if you made the $13 million in bequests via your will, the money would be part of your taxable estate and would trigger an enormous tax bill."

Curb1: .. great job, I couldn't write the details any better and you clarified things many people didn't know about gift taxes.

They are free of taxes... All the giver have to do is file a form in which they state how much was given that exceeded 13K/person that year. That's about it.

And it is a maximum of $1 Million dollars that you can give away without having to pay any gift taxes.
 
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Grahajp

Junior Member
Back to the original question, as I've often wondered this as well.....

Could parents who jointly own property, give that property in a single transaction to their son and daughter-in-law as a jointly deeded property, assuming that the value of the property was $52K, and not trigger the need for gift tax form 709 reporting?


Personally, I have always done 4 singular 13K transactions (person to person), to keep documentation auditable and clear cut. With cash or stock transactions, that is easier to do.


With a jointly owned real estate transaction, is it a potential audit problem? Or, is there backup paperwork that should be kept to support that it was effectively gifting under the 13K limits?
Thanks for all of the feedback. It seems that the property could be jointly deeded to my wife and I and my parents would not have to worry about the gift tax. They are not wealthy, so will never reach the $1 million mark of lifetime gifting. You mention forms and/or paperwork. Are there "standard" forms for this type of gift, besides the deeding of course. we have an appt with an attorney next week to discuss this and I am just trying to be somewhat informed before we go. Thanks again
 

TrustUser

Senior Member
just curious - what do the very wealthy do, regarding gifts ?

it is not uncommon for a father to buy his son a $50,000 sports car, etc.

or one spouse for another ?
 

anteater

Senior Member
just curious - what do the very wealthy do, regarding gifts ?

it is not uncommon for a father to buy his son a $50,000 sports car, etc.
Generally, they claim it as a business expense.

or one spouse for another ?
I tried to gift my spouse to someone, but they declined the gift. Even when I offered to throw in a first round pick in the following year's draft.

(Just as there is an unlimited estate tax exclusion for transfers to spouses, there is no limit on gifts between spouses.)
 
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