Gift Equity

[geekgirldany]

Hi everyone. I have a client that is wanting to do a gift equity for his son. Client owns a house. It was never rented out.
Client paid $130,000. The son will get a loan for $90,000 which is what the father owes on the house. He said the gift equity amount would be $27,000.

I hope some of you can help me with a few questions:

Client will gift Son & Son's Wife $13,000 each. Total is $26,000. Will a gift tax return have to filed because the gift is over the annual exclusion?
Would one have to be filed anyways showing the sale of house transaction? I know no tax would be due on the gift tax.

Client paid $130,000, son is paying $90,000. So would the client have a unrecognized loss of $40,000? or would it be a unrecognized loss of $13,000 ($90,000 + gift equity $27,000 = $117,000).
From my reading it appears that the purchase price for the client is the amount actually received.

Client's wife is not listed as a owner on the home. So she can not do any gifts to the son and wife, correct?

Already talked to Client and gave him an idea but want to make sure on the above as I have read several different things that contradict one another.

Thank you
DAny

[appelman]

Where does the 27K figure come from?

Is 117K the FMV of the property? If so, the more straightforward approach might be a cash gift of 27K, followed by purchase of the property for FMV. Someone else may have thoughts on this.

Some answers:

1) If any gift to one person exceeds the exclusion, a gift tax return must be filed.

2) I would say 13K, assuming that 117K is the FMV of the property. But does it matter? More important is the son's basis, which would be purchase price IF that is FMV. This is why I think a cash gift would be cleaner.

3) A taxpayer and spouse may always elect to split a gift, no matter where it comes from. But the spouse making the gift does have to file a gift tax return to make the election.