Gift Tax

[sheila49]

What is the name of your state? SC

My mother died a year ago and left 100 acres of land in Illinois. I have 3 siblings. The land has been assessed at 200k. I want to buy out the land. My one brother wants 42500 for his share. My other siblings would like to give me their share. I have a spouse. They each have a spouse. If I would pay them 20k each for their portion of the land, are they going to get hit with the gift tax? Is there a way around taxes? If I would set up a contract to pay them part now and part next year, would that affect their tax situation?

 

[efflandt]

It is not clear if the estate has been properly settled first (probate or whatever).

If you buy something, it is a purchase, not a gift. Although, if you puchase something for what the gov't considers significantly less than fair market value, the difference between what you pay and fair value might be considered a gift to you. I don't know if what you pay for the property affects property taxes, but it does affect your cost basis if you eventually sell the property.

The gift exclusion for no tax, and no filing requirement, is currently $11,000 person to person per year (unless it increased for 2006). So you could effectively gift $22,000 per year to a couple, and if you have a spouse, they could also gift $22,000 to the same couple. There is also a Unified Lifetime Estate Exclusion for a much larger amount that requires filling out forms, but no tax within its limits. But again, this has nothing to do with what you pay to purchase, unless the gov't considers it significantly less than fair value, or if you pay them fair value and want to have them gift some of that back to you (which may be more difficult to implement, once they get their hands on the money, they might not want to gift some of it back).

Do a search for "gift tax" on http://www.irs.gov/

You might also check http://www.revenue.state.il.us/ to see if anything with the estate or sales transactions requires filing a non-resident tax form (even if sold for less than inherited value, ie, no gain).

 

[LdiJ]

What is the name of your state? SC

My mother died a year ago and left 100 acres of land in Illinois. I have 3 siblings. The land has been assessed at 200k. I want to buy out the land. My one brother wants 42500 for his share. My other siblings would like to give me their share. I have a spouse. They each have a spouse. If I would pay them 20k each for their portion of the land, are they going to get hit with the gift tax? Is there a way around taxes? If I would set up a contract to pay them part now and part next year, would that affect their tax situation?

If you bought 25% of the land from your brother there would be no tax consequences if FMV is reasonably close to the actual purchase price.

If each of your other siblings "gift" you their 25% of the property the gift is worth their basis (FMV on the date they inherited the property). They may have to file a gift tax return but it won't result in any actual taxes geing due unless it exceeds their lifetime exclusion for gifting. (at least one million)