Returning a Gift

[Katking91]

Saving on capital gains

My husband and I have lived in our PA house for about 8 years now. The deed was put into my sister and brothers-in-laws name but never filed. My father paid for the house so all of us could live here but my sister and brother-in law moved on, not even knowing their name was on the deed. According to our family the house was technically "ours" as we maintained the home and paid taxes, etc. In November my husband and I wanted to purchase some land and needed to have the house put into our name. Not knowing any consequenses of a capital gains and gift taxs (on my sister and brother-in laws behalf) we filed their deed and then had them sell the house to us for $1.00. Only now we realizIe that we should have put the deed in our name in the first place and we may have to pay about $20,000 in capital gains taxes because of this mistake. Is there any way to UNDO this? Can these deeds be undone? I know you can tecnically return a gift within 6 months after it is given to you. How do you return a gift and how could we use this law/rule to help us? I briefly spoke with an attorney here but he was unsure of what we should do.

After reading post in Real Estate-Buying and Selling HomeGuru says:
1. Next time check with a real estate attorney and/or a CPA before making any title changes.

2. Post to the Tax Law board as there is a way to save on taxes.


[Edited by Katking91 on 03-26-2001 at 09:35 PM]

 

[loku]

House sale for $1

The “sale” of the house to you for $1 was not a sale under the Internal Revenue Code. It was a gift; therefore there is no income tax on it. If the value of the home was over $20,000, your brother and sister in law will have to file a gift tax return, but there will be no tax to pay unless the house was worth well over 1 million. Following is an explanation of the applicable law.

IRC §2512(b) provides that, if property is transferred for less than adequate and full consideration in money or money's worth, the excess of the value of the transferred property over the value of consideration received is a gift for federal gift-tax purposes. Accordingly, the regulations provide that a gift includes: ales, exchanges, and other dispositions of property for a consideration to the extent that the value of the property transferred by the donor exceeds the value in money or money's worth of the consideration given therefor.