What do you think.

[BOB W]

I have a father that wants to give his children his home in NY (he lives in FL). One son is going to live there and the gift of the home will be in his name only . The one son is going to give the other two children $x when he gets a mortgage on this home ( there is no existing mortgage ). The father wants his cost basis back $125,000 after the son gets a $300,000 mort.

Question, can all this be done with gifts and no sale of the home? The one son who is getting the home would have to file gift tax return to father and siblings as well as the father to the one son for the house, possibly reduced by the $125,000.

[Armando Beaujolais]

I have a father that wants to give his children his home in NY (he lives in FL). One son is going to live there and the gift of the home will be in his name only . The one son is going to give the other two children $x when he gets a mortgage on this home ( there is no existing mortgage ). The father wants his cost basis back $125,000 after the son gets a $300,000 mort.

Question, can all this be done with gifts and no sale of the home? The one son who is getting the home would have to file gift tax return to father and siblings as well as the father to the one son for the house, possibly reduced by the $125,000.

There's info on below market sales on page 21-18 of TheTaxBook.

Dad could sell the home to Son 1 for $125,000. No gain on the sale, and $175,000 gift.

The dad is the one who is going to have to file the gift tax return, not the son.

Why not gift all the sons an interest in the house? If there are spouses involved, a lot of that $175,000 gift could get absorbed by the annual exclusion, especially if the gift was split up between 2006 and 2007, maybe it could all get excluded.

[Unregistered]

I'm with Armando,

Assuming that the father sells the house to the son for $125,000 and gifts the remainder $175,000 to him. Then Son A (new home owner) and his wife gift $12,000 each to sibling A and sibling B on Dec. 31 and Jan. 1, and Son A and his wife gift $12,000 each to sibling A and sibling B's spouses on Dec. 31 and Jan. 1 you have eaten up another $96,000 ($12,000 x 8 gifts). Then, to get rid of the remaining $4000 (each child of father then gets 1/3 of home value) Son A could give one child of each of his siblings $2000 to be returned to their parent, completing the gift. Then the father files one gift return, everyone has their money and the attorney takes care of most of the paperwork!

Now, charge the father a couple thousand dollars for devising the plan (Armando and I will take 10%, or course).

JoshInNC

[Bird Legs]

Great Plan

Now, DO NOT FORGET to get it copyrighted.

[Unregistered]

Yeah, I need a patent!

I read recently that tax and financial professionals are actually patenting tax avoidance strategies and then either suing others who use the strategy or sell the strategy to other advisors.

JoshInNC

[BOB W]

Ok....

So a sale for $125,000 with a gift of the remainder of FMV to Son 1, who will own the home. Son 1 must give the 2 other siblings a piece of the equity, per fathers request. That is why son 1 is mortgaging $300,000 ($125,000 to Dad and $87,500 to each of the other siblings). That is why I was talking about son 1 having to file a gift tax return, to cover the sibling gift.

Can all of the gifts be covered in the sale/gift contract so that it is the father giving the $87,500 to each of the other 2 children without those children being an owner of the NY home?

[Unregistered]

If you want to use your scenario then,

the father would sell the house for $300,000, and then gift to the other children their respective shares. By having the buyer (Son 1) and his wife split the gifts to each sibling and their spouses you avoid the filing requirement for gift taxes.

JoshInNC

[BOB W]

2 Out Of 5

the father did not live there 2 out of 5 years, so it would be a LTCG to him.

[JoshinNC]

Ohhhhhhh!

Now I see.