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Posted by Ron Rosenfeld on March 12, 2007, 8:34 pm
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> No one seemed to mention........ If they need it now that's
> one thing. They are going to bulid/farm/ranch it etc.
>
> If you're trying to plan for the future and move assets to
> "settle" your estate, letting them inherit the land "steps
> up" the basis to the value at that point in time.
>
> That is for example, if the land is worth $1M- -no one pays
> gains tax on the increase. Might want to gift them
> something else, BUT you also have to consider the estate tax
> potential overall.
No, the reason we would consider gifting them the property
would be if they were going to build a home and live there.
Otherwise, it's up for sale.
--ron
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Posted by Stuart A. Bronstein on March 12, 2007, 8:34 pm
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>> If we were to give it to our children, how do we value the
>> property for gift tax purposes? What would their basis be?
>>
>> "We" are husband and wife.
> No one seemed to mention........ If they need it now that's
> one thing. They are going to bulid/farm/ranch it etc.
>
> If you're trying to plan for the future and move assets to
> "settle" your estate, letting them inherit the land "steps
> up" the basis to the value at that point in time.
>
> That is for example, if the land is worth $1M- -no one pays
> gains tax on the increase. Might want to gift them
> something else, BUT you also have to consider the estate tax
> potential overall.
Depending on the size of their taxable estates, it may be
better to get it out of their estates now even if the kids
don't get a stepped up basis. For the same amount of money
the estate tax is going to be higher than income tax -
particularly long term capital gain.
That said, for the large majority of estates, because of
their size, the stepped-up basis is the better choice.
Stu
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<< The foregoing was not intended or written to be used, >>
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<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
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Posted by Ron Rosenfeld on March 30, 2007, 3:56 am
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> We purchased property some years ago -- raw land for $30K.
>
> It's not liquid, but it's probably worth a lot more today.
>
> If we were to give it to our children, how do we value the
> property for gift tax purposes? What would their basis be?
>
> "We" are husband and wife.
>
> "They" are son (of one of us) and daughter-in-law.
Some more thoughts on this issue, that just occurred to me.
To avoid yearly appraisals and deeding, as was a suggestion,
why not just sell them the property at FMV (one appraisal,
one deed) and take back a mortgage at a reasonable interest
rate.
Then it would just be a matter of forgiving $48,000/year of
the amount due on the mortgage, until it is "paid off".
Is that allowable?
--ron
<< ======================================================= >>
<< 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 >>
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<< Copyright (2006) - All rights reserved. >>
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Posted by Stuart A. Bronstein on March 30, 2007, 10:46 pm
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> Some more thoughts on this issue, that just occurred to me.
> To avoid yearly appraisals and deeding, as was a suggestion,
> why not just sell them the property at FMV (one appraisal,
> one deed) and take back a mortgage at a reasonable interest
> rate.
>
> Then it would just be a matter of forgiving $48,000/year of
> the amount due on the mortgage, until it is "paid off".
>
> Is that allowable?
It's certainly allowed. But you have to be careful not to
make it look like you are setting it up in advance
necessarily to do it every year, even if you do. Each
annual forgiveness should be individual and not promised in
advance. One approach would be to have them actually make
one annual payment by check, and you either send it back or
keep it and write "cancelled" on it. Oh, and make sure you
take a mortgage in the property to insure payment.
There is one other thing. A sale means taxable income. If
you don't qualify for the exclusion for sale of a residence,
your forgiveness of purchase payments will be taxable income
to you as if you had actually received money. Or your kids
could be taxable on that money as cancellation of debt
income.
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. >>
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<< to this newsgroup as well as our anti-spamming policy >>
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Posted by Ron Rosenfeld on March 31, 2007, 10:14 pm
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> There is one other thing. A sale means taxable income. If
> you don't qualify for the exclusion for sale of a residence,
> your forgiveness of purchase payments will be taxable income
> to you as if you had actually received money. Or your kids
> could be taxable on that money as cancellation of debt
> income.
Hmmm.
Sounds as if I need to both read more, and also check with a
professional before setting this up.
Thanks for pointing out that pitfall.
The "sale" would very definitely not qualify as a tax-free
event.
--ron
<< ======================================================= >>
<< 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 (2006) - All rights reserved. >>
<< ======================================================= >>
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