gift of property to children

[mightmen16]

Client gifted their property to 3 of their children. Value of $296,600. Do I have to file Gift tax or genteration gift tax?

[Uncle Sam]

Form 709 is necessary when the FMV of gifts given exceed $ 15,000 per year per beneficiary. If gift is given by both spouses, each spouse gets the $ 15,000 exclusion.

[MDEA]

If children married they could give each a total of $60,000 to each couple.

[TaxGuyBill]

You may first want to verify that a Gift truly took place, rather than just transferring title for other purposes. If it was merely a title transfer but parents still have full use of the property while the children do not, it would likely be a Life Estate situation, rather than a completed Gift.

[Burke]

Agree. If the parents are still living in the home and paying for all the upkeep, taxes, utilities, etc. etc., such a transfer would be an incomplete gift, and it would still be considered part of their estate(s) at their death for tax purposes, and get a stepped-up basis. So no 709.

[New York Enrolled Agent]

Burke - you & TGB may well be correct but a snip from the regulations for §2511 make me pause. Are there exceptions? Maybe, but it's too late at night to ponder this.


(e) If a donor transfers by gift less than his entire interest in property, the gift tax is applicable to the interest transferred. The tax is applicable, for example, to the transfer of an undivided half interest in property, or to the transfer of a life estate when the grantor retains the remainder interest, or vice versa. However, if the donor's retained interest is not susceptible of measurement on the basis of generally accepted valuation principles, the gift tax is applicable to the entire value of the property subject to the gift. Thus if a donor, aged 65 years, transfers a life estate in property to A, aged 25 years, with remainder to A's issue, or in default of issue, with reversion to the donor, the gift tax will normally be applicable to the entire value of the property.

[TaxGuyBill]

Burke - you & TGB may well be correct but a snip from the regulations for §2511 make me pause. Are there exceptions? Maybe, but it's too late at night to ponder this.


(e) If a donor transfers by gift less than his entire interest in property, the gift tax is applicable to the interest transferred. The tax is applicable, for example, to the transfer of an undivided half interest in property, or to the transfer of a life estate when the grantor retains the remainder interest, or vice versa. However, if the donor's retained interest is not susceptible of measurement on the basis of generally accepted valuation principles, the gift tax is applicable to the entire value of the property subject to the gift. Thus if a donor, aged 65 years, transfers a life estate in property to A, aged 25 years, with remainder to A's issue, or in default of issue, with reversion to the donor, the gift tax will normally be applicable to the entire value of the property.

Interesting, you may be right. Although the Instructions seems to indicate that may only apply to Direct Skips. But this is definitely NOT my area of expertise.

https://www.irs.gov/instructions/i709#idm140297522491632

[Gretel]

The way I understand a transfer with a retained life estate is that this is subject to two different rules at the same time. As long as the donor is still alive the gift tax rules apply. At the moment the donor dies, the "gifted' property is included fully in the estate. It's about 10 years back that I looked this up so do not ask me for references, I do not longer recall which client this pertained to.