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Subject Author Date
Basis of Property Purchased For $1 From Parents Knarc 03-02-2008
Posted by LoTax on March 2, 2008, 8:41 pm
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> Harlan Lunsford wrote:
> >> I thought pub 551 was fairly clear that in the situation where a
> >> property was acquired by gift and at the time the FMV exceeded the
> >> donor's basis that the donor's basis was passed to the recipient of
> >> the gift.
>
> >> However, one of the siblings has a tax preparer telling them that the
> >> basis should be the FMV on the date of the gift. �I don't agree and my
> >> client (a different sibling) obviously wants to use the FMV suggested
> >> by the other preparer.
>
> > You may disagree with that other tax preparer in good conscience, too.
>
> Basis is passed along with a gift (unless FMV dropped, you can't pass
> along a built-in loss). Only death (that I know of) can create a step up
> in basis. Which is why the "give the house to the kids for a buck" route
> is usually the wrong way to go. The kids could have chipped in to pay
> for an irrevocable trust, which would have provided some protection, and
> allowed the step up upon death.
> JOEwww.blog.joetaxpayer.com
>
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Did the parents live in their house - after the gift - until they
died? They may have created an "incomplete gift" and their heirs
should look further into this. It may have income tax consequences to
the heirs.

========================================= MODERATOR'S COMMENT:
Please trim away all extra text before posting!!!

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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
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Posted by removeps-groups@yahoo.com on March 2, 2008, 8:39 pm
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> Property was sold to 3 siblings for $1 approximately 10 years ago. You
> are correct that no gift tax return was filed.

I think the statute of limitations is 10 years, so the IRS cannot come
after your parents or estate for not filing a gift tax return. But
I'm not totally sure about this statement. See
http://www.wwwebtax.com/audits/statute_of_limitations.htm. In any
case, I think that 10 years ago the lifetime gift exemption was about
600k, so quite possible that may have been no gift tax due anyway,
just a gift return.

> However, one of the siblings has a tax preparer telling them that the
> basis should be the FMV on the date of the gift. I don't agree and my
> client (a different sibling) obviously wants to use the FMV suggested by
> the other preparer.

I see the purchase of a house for $1 as a gift, and since it was made
while your parents were alive, your basis for the house is their basis
if their basis is less than 100k. However, if they bought the house
for more than 100k, like 150k and its price decreased and its FMV was
100k at the time of the gift, then the basis of the house is 100k.

Did the title of the house really change 10 years ago? If yes, then
the above paragraph seems right to me.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Stuart Bronstein on March 3, 2008, 6:02 pm
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>
>> Property was sold to 3 siblings for $1 approximately 10 years
>> ago. You are correct that no gift tax return was filed.
>
> I think the statute of limitations is 10 years, so the IRS cannot
> come after your parents or estate for not filing a gift tax
> return.

Sorry, that's wrong. The statute of limitations never starts to run on
a tax return that is not filed.

> But I'm not totally sure about this statement. See
> http://www.wwwebtax.com/audits/statute_of_limitations.htm.

You have misunderstood the artile. In any case, the article deals with
income tax, not gift tax returns.

> In any case, I think that 10 years ago the lifetime gift exemption
> was about 600k, so quite possible that may have been no gift tax
> due anyway, just a gift return.

If there was no gift tax or estate tax due (including the value of the
gift in the estate) then it's probably ok. That wouldn't change the
basis rule, though.

Stu

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

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