Home transferred to adult child

[tracyb]

Hi everyone,

I have a scenario where a home was transferred to the daughter in 2007. Parent is still living but physically residing with another sibling.

Would just a gift return be appropriate for 2007 and basis would be computed same as parents basis and gains would have to be paid when the property is sold?

Thanks!

Tracy

[BOB W]

Hi everyone,

I have a scenario where a home was transferred to the daughter in 2007. Parent is still living but physically residing with another sibling.

Would just a gift return be appropriate for 2007 and basis would be computed same as parents basis and gains would have to be paid when the property is sold?

Thanks!

Tracy

Is the adult child living in the house?

[solomon]

Hi everyone,

I have a scenario where a home was transferred to the daughter in 2007. Parent is still living but physically residing with another sibling.

Would just a gift return be appropriate for 2007 and basis would be computed same as parents basis and gains would have to be paid when the property is sold?

Thanks!

Tracy

Assuming FMV is greater than donor basis, donee basis(in addition to donor's basis) would be FMV minus donor basis divided by FMV times any gift tax on the appreciation of the donor's gift.

[tracyb]

Home transferred to child

Yes, the adult child is residing in the house.

[BOB W]

Yes, the adult child is residing in the house.

Then a gift tax return needs to be filed. Be sure to get the parent's basis documented for future use.

It would of been good to get a "Life Estate" on the deed. This would allow the parent to move back in and at the same time make the gift "incomplete". Upon the death of the parent FMV at death would be the basis for the child in figuring gain or loss going forward.

Depending on the value of the house, most profit would be excluded anyway ($500,000 or 250,000 if single). Now-a- days a " Life Estate" on many homes is not as important. But it could due to inflation or a change in tax treatment down the road.................

[Kram BergGold]

Disagree on life estate

First I am assuming that you can do a life estate where the donor does not live in the house but reserves the right to move in, in the future. But I question if this is accurate.
Second, my understanding of a life estate is the donor must keep up the house as if it were his or hers. I doubt that the mother in this scenario could afford to keep up the house. If the daughter who lives in the house pays the expenses the life estate goes by-by.

[Kram BergGold]

Back to Origianl ?

I agree, gift tax return should be filed showing a gift of the difference between mother's basis and FMV on date of gift. Remember to step up basis as a result of father's death. If father died before some date in the 70s there is a chance to get 100% step up rather than 50%. I am sure this is the TTB somewhere.

[farm girl]

My father just asked me about this ....

If father died before some date in the 70s there is a chance to get 100% step up rather than 50%. I am sure this is the TTB somewhere.

He read an article that stated if you purchased your home before 1977, the step up in basis upon the death of a spouse would be 100%. It's nothing I've ever heard before and I told him I would check in to it. The only thing I could find in TTB was based on inheriting a house before 1977. Can you tell me where I can go to get more information on this?

[Gene V]

He read an article that stated if you purchased your home before 1977, the step up in basis upon the death of a spouse would be 100%. It's nothing I've ever heard before and I told him I would check in to it. The only thing I could find in TTB was based on inheriting a house before 1977. Can you tell me where I can go to get more information on this?

Reading from J.K.Lasser’s
2005 edition. Page 121.
Spousal Joint Tenancies Created Before 1977
If spouses jointly own property and one spouse dies, the surviving spouse generally receives a stepped-up basis for 50% of the date-of-death value. The IRS at one time took the position that the 50% stepped-up basis rule applied to pre-1997 spousal joint tenancies. However, after the Tax Court and two federal appeals courts allowed a surviving spouse a 100% stepped-up basis if the spousal joint tenancy was created before 1977 (see Example 3 in the left column), the IRS decided to follow the Tax Court decision and will no longer litigate the issue.

Example 3 is on page 121 of Lasser’s Your Income Tax Guide.