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Posted by Lee Tol on May 22, 2007, 11:38 pm
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My parents want to gift me $300K to help purchase a home.
What is the best way to do this for mutual benefit with
minimal tax implications?
Thank you!
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Posted by bono9763@yahoo.com on May 23, 2007, 4:43 pm
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> My parents want to gift me $300K to help purchase a home.
> What is the best way to do this for mutual benefit with
> minimal tax implications?
Your parents can each gift you $12,000 per year, for a total
of $24,000, without any tax consequences. If you are
married, they can gift you and your spouse each $12,000, for
a total of $48,000. If they gift you more than that, they
will have to file a gift-tax return, Form 706. They won't
owe any tax, it will just reduce their lifetime estate tax
exemption amount, currently at $1,000,000, I think.
Alternatively, they can set it up as a loan, and each year
they can forgive $24,000 of the loan (or $48,000 if you are
married.) The downside of this is that it will take as much
as 13 years to forgive, and depending on their ages and
health, they might not live that long or might change their
minds about the loan.
One other factor that could mess this up is that the current
estate tax law expires in 2011, and who knows what Congress
will do to extend it, alter it, or not.
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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. >>
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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. >>
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Posted by Stuart A. Bronstein on May 25, 2007, 1:41 pm
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>> My parents want to gift me $300K to help purchase a home.
>> What is the best way to do this for mutual benefit with
>> minimal tax implications?
> Your parents can each gift you $12,000 per year, for a total
> of $24,000, without any tax consequences. If you are
> married, they can gift you and your spouse each $12,000, for
> a total of $48,000. If they gift you more than that, they
> will have to file a gift-tax return, Form 706. They won't
> owe any tax, it will just reduce their lifetime estate tax
> exemption amount, currently at $1,000,000, I think.
That's form 709. The 706 is for estate taxes.
To effect the gradual transfer the parents can buy the
property, have have it appraised each year. After they
appraisal they can transfer the percentage that corresponds
with $24,000 (or whatever the exempt amount is in the
applicable year).
> Alternatively, they can set it up as a loan, and each year
> they can forgive $24,000 of the loan (or $48,000 if you are
> married.) The downside of this is that it will take as much
> as 13 years to forgive, and depending on their ages and
> health, they might not live that long or might change their
> minds about the loan.
Also on the downside either the parents will have to
recognize phantom income on the interest they don't receive,
or the children will have to recognize cancellation of debt
income in that amount.
> One other factor that could mess this up is that the current
> estate tax law expires in 2011, and who knows what Congress
> will do to extend it, alter it, or not.
It expires but if not changed the former law comes back,
leaving people with a $1,000,000 combined gift and estate
tax lifetime exemption.
Stu
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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. >>
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<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
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Posted by Gil Faver on May 29, 2007, 10:44 pm
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>>> My parents want to gift me $300K to help purchase a home.
>>> What is the best way to do this for mutual benefit with
>>> minimal tax implications?
>> Your parents can each gift you $12,000 per year, for a total
>> of $24,000, without any tax consequences. If you are
>> married, they can gift you and your spouse each $12,000, for
>> a total of $48,000. If they gift you more than that, they
>> will have to file a gift-tax return, Form 706. They won't
>> owe any tax, it will just reduce their lifetime estate tax
>> exemption amount, currently at $1,000,000, I think.
> That's form 709. The 706 is for estate taxes.
>
> To effect the gradual transfer the parents can buy the
> property, have have it appraised each year. After they
> appraisal they can transfer the percentage that corresponds
> with $24,000 (or whatever the exempt amount is in the
> applicable year).
a single appraisal in December should suffice for one gift
in December and next year's gift in January. This will cut
down on appraisal fees.
<< ------------------------------------------------------- >>
<< 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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Posted by joetaxpayer on May 23, 2007, 4:43 pm
Please log in for more thread options Lee Tol wrote:
> My parents want to gift me $300K to help purchase a home.
> What is the best way to do this for mutual benefit with
> minimal tax implications?
The least convoluted way is for them to declare the gift and
take a credit against their lifetime unified gift credit.
(The $1 million each they can gift in advance). The IRS.gov
web site has further explanation on this.
The other choice, which avoids tapping that credit, is for
them to gift you $48,000 now (this is 4 times the annual
gift exclusion, and presumes you are married, each of your
parents can gift each you and your spouse $12,000) and lend
you the remaining $252K. Be sure they have a lien on the
house and you agree to pay them market interest. They then
continue to gift you the maximum amount allowed each year,
which you can use to pay the interest and pay down the
principle. This arrangement requires a legal document which
the closing attorney would draw up. The numbers change if
you are single, but the idea is the same.
JOE
<< ------------------------------------------------------- >>
<< 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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