Son is living in mother's Inherited home

[SFBOB]

If son wanted to help out his mother, my not gift her $6000.00 twice a year rather than paying her $1000.00 per month. If he paid her $1000.00 per month, the IRS may consider the money as rental income.
Your comments will be appreciated. Have a good one Bob

[Kram BergGold]

A suggestion

I would have son give Mom $13,001 a year and file a gift tax return. At least this shows you really think of it as a gift. However, if it quacks like a duck it probably is a duck.

[Lion]

Roommates?

If they're really a couple of roommates sharing living expenses, instead of landlord and renter, they why doesn't son pay electricity, groceries, repairs, etc., which would fluctuate throughout the year. Mom would continue to pay mortgage interest and property tax.

[JohnH]

I took the original post to mean the son is living in an inherited house other than the house mom lives in (although that's only an assumption on my part, and we've seen plenty of situations where my assumptions took me to all kinds of wierd, irrelevant places).

[Lion]

Oh

Oh, in that case I'd agree with Mark's suggestion if the intent is to give gifts to Mom and not to rent from Mom.

[FEDUKE404]

On further review

I'm not really sure who inherited what here.....

One would think issues to be considered might involve:

1 - Is son living in a house (owned by mom) and effectively paying "someone" rent?

2 - Is son living in mom's residence and effectively paying her rent?

3 - Is son living in a house that once was mom's (deceased)?

4 - Does mom have exposure issues to "too much" income she might receive???

4a - Does mom still file (or might need to file) an income tax return?

FE

[SFBOB]

Review of the facts

The prior tax preparer set the house up as a rental in 2004 two years after my new clients mother died. If I had been the preparer at that time, I would have suggested that the son gift the mother $12,000 per year as a thank you for living in the mothers inherited house from the son's grandmother. The son had lived with the grandmother for over 10 years, rent free. I would like to let the rental drop fron the 2011 tax return. What are the continued thoughts from the group? Thanks Bob

[FEDUKE404]

Hmmmm I don't know

The prior tax preparer set the house up as a rental in 2004 two years after my new clients mother died. If I had been the preparer at that time, I would have suggested that the son gift the mother $12,000 per year as a thank you for living in the mothers inherited house from the son's grandmother. The son had lived with the grandmother for over 10 years, rent free. I would like to let the rental drop fron the 2011 tax return. What are the continued thoughts from the group? Thanks Bob

I will let the wiser minds here comment on whether a continuing "gift" could even be considered under these circumstances.

What I do see is a likely Schedule E, and as a result of any number of issues (expenses) was the son's mom perhaps showing a net rental loss each year?

And then.....depreciation can also rear its ugly head.

Keep us posted!

FE

[Kram BergGold]

Funny how all the facts change the answer

The son has agreed on his taxes for 6 years that he is paying rent. As nothing has changed I would continue as rent.

[taxmom34]

now i'm really confused! mother died in 2002, why is he reporting monies paid to her as rent, or giving her gift each year? or is it that the grandmother died in 2002 and now the mother and/or son are living in that house?

[SFBOB]

Mother Son Grandmother

[1]The Grandmother died in 2002. Her daughter, the sons mother inherited the house in 2002.
[2] The sons mother NEVER lived with the Grandmother or son. The mother has her own seperate house that she purchased with earned income.
[3] If I had been the original preparer I would have suggested the the son gift his mother $12,000 once a year and live in the inherited home as long as they agreed upon the arrangement. I think it was a mistake to set the house up as a rental with her son. The IRS could also question; is the son paying FMV rent?

I am looking for someone that would support my position to just drop the rental from the 2011 return. Why not, is it aganist the law? Maybe I should pay NATP $27.00 for their position in writing. Thanks to all for your feed back. Bob

[New York Enrolled Agent]

Read the definition of a gift in the Supreme Court decision in Duberstein. It's not so easy to call something a gift when the facts support otherwise.

[SFBOB]

Thanks to New York EA and all others for comments

Think how great this board is. What an education we get thanks to THE TAX BOOK users that post their remarks.
For those that wish to get the answer I was looking for. Go ahead and Google Duberstein Case. It clarififys my question. The son would not have gifted the Mother at the rate of $1000 per month if it was not considered rent by the son and the mother. California also has a renters credit for people that do not exceed a certain income level.Son may have applied for this credit?
If my new client had said to the son you are welcome to live in Grandmothers home until such time you or I decide on a altenate course of action. Then the son later said MOM I am gifting you $12,000., because you have been a great mother to me. This would have been a gift. No questions asked. The purpose was established in 2004 by the mother and the original tax preparer. The $12,000 per year is rent. Have a great week end everyone. Bob PS Any one that wants to continue the question and clarifiy want the IRS would do if the rent is not FMV please go ahead and keep things going for the benefit of all.The rent is not FMV in the California Bay Area.