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Sale of Property-Gift of proceeds

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    Sale of Property-Gift of proceeds

    Client bought grandparents home. Converted it to rent property. told 2 siblings
    when he bought it that when it was sold the proceeds would be divided between the 3 of
    them.
    Client sold the rent property in 2005 and did give each sibling 1/3 of sales price.
    Question: This would be considered a gift and not a reduction of sales price, right?
    Wrong? My aging brain is starting to catch up with the rest of me and sometimes
    does not think right.
    Appreciate your help.

    #2
    Originally posted by Bird Legs
    Client bought grandparents home. Converted it to rent property. told 2 siblings
    when he bought it that when it was sold the proceeds would be divided between the 3 of
    them.
    Client sold the rent property in 2005 and did give each sibling 1/3 of sales price.
    Question: This would be considered a gift and not a reduction of sales price, right?
    Wrong? My aging brain is starting to catch up with the rest of me and sometimes
    does not think right.
    Appreciate your help.
    [1] Client bought the house.
    [2] Client sold the house
    [3] Client gave money to siblings.
    Since the siblings were involved in neither the purchase or the sale since only the client had ownership, the money he gave the siblings was a gift.

    The gift to the siblings was not an expense of the sale.

    Comment


      #3
      gift tax return

      Since the sale and gifts were all steps in a single, planned transaction, and the seller didn't end up with the money, I think it is a reduction in sale price (seller claims a capital loss) and the buyer has to use the lower price as basis and also has to file the Form 706 gift tax return!

      Comment


        #4
        I agree with Joe. It appears from the post that this is a gift from the seller as the seller had no legal requirement to pay or gift anything to the siblings. I do not see this as all just steps in one transaction. Also, this is a real estate transaction where paperwork is considered more factual than any verbal agreement and where clear title passes.

        I would reconsider my opinion if the seller did not pay a fair market value for the property purchased from grandparents and as such it appears he was only owning the property for his inheritance protection and that of his siblings.

        Comment


          #5
          This is clearly a gift to the siblings. No need for a crystal ball on this one.

          Comment


            #6
            Originally posted by jainen
            Since the sale and gifts were all steps in a single, planned transaction, and the seller didn't end up with the money, I think it is a reduction in sale price (seller claims a capital loss) and the buyer has to use the lower price as basis and also has to file the Form 706 gift tax return!
            Using that logic, if I sell stock at a loss and give the proceeds to a charity I can't deduct the loss.

            Comment


              #7
              Logic?

              Logic? We ain't got no logic. We don't need no logic! I don't have to show you any stinkin' logic!!

              Comment


                #8
                Valid point

                Originally posted by jainen
                Logic? We ain't got no logic. We don't need no logic! I don't have to show you any stinkin' logic!!
                You really hit the nail on the head. After all, what has logic got to do with income tax?

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