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Gift of land over time

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    Gift of land over time

    I have a client that sold part of their farm to their child. It appraised for 99K and they sold it for 33K. It is on installments at interest rate of 1.25% or something ridiculous like that. The child are paying payments of $1200 per year.

    The attorney told them they could gift some of it yearly. The deed is already written. I have never understood how you could gift a portion of something, unless you deed the acres that would be valued at $11K per person every year.

    Of course, my question is: Can this gift over time be done? If so how?

    They did the same thing with another child.

    My opinion

    The gift is $66,000, the difference between FMV and the sales price. So if the installment sale dictated that every year for 33 years $1,000 of principle would be paid off then to me it seems that every year there is a $2,000 gift. However as I think about this it is kind of like a gift of a house with a life estate in that it is a gift of a future interest so maybe the $66,000 gift does get reported on a 709 in year one of the transaction.
    Regis, "Is that your final answer"-
    Mark, "Yes, report all in year 1 on Form 709".


      dmj4 - Kids today;

      what can you say?

      I've done deals like that with my kids, but your client's look good compared to mine. No way would I have received 1/3 (or any) principal and the princely sum of 1.25% interest is quite attractive to me. But then, for all practical purposes, I suppose my related sales should be considered outright grants.

      Remember we will make (gift) no wine (land) until it's time (sorry-I'm on a roll).

      I concur with Goldie (except to the extent I'd ignore the whole thing).



        I agree with the lawyer (for a change). A "gift" can be be given annually involving fractional shares of property, without having to physically, (or by title) subdivide the property. Your client could have done this, but from your text, this is not what happened.

        See if you can get with the lawyer and stop the transaction from being perfected. It sounds like it might already be too late.

        "Make no wine before it's time?" Good grief. I guess the weather is so bad in Arkansas that Bart can't do anything else but crank his wheels...Stay dry, my friend!

        Regards, Ron J.
        Last edited by Snaggletooth; 09-24-2005, 11:58 PM. Reason: addition