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Posted by SMF on December 28, 2006, 12:26 am
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Parent transfered house to son for $1 in 1990. Son sold in
2006. Would the house basis be the FMV on the date he bought
or really looks like inherited?
Thanks.
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Posted by Bill Brown on December 28, 2006, 8:54 pm
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SMF wrote:
> Parent transfered house to son for $1 in 1990. Son sold in
> 2006. Would the house basis be the FMV on the date he bought
> or really looks like inherited?
If his parents retained a life estate in the house then
there's a good chance the son's basis is the FMV on the date
the last parent died.
If the son got an unrestricted gift in 1990 then his basis
is his parent's basis + $1 + the costs of any capital
improvements he paid for.
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<< The foregoing was not intended or written to be used, >>
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<< Copyright (2006) - All rights reserved. >>
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Posted by Herb Smith on December 28, 2006, 8:54 pm
Please log in for more thread options SMF wrote:
> Parent transfered house to son for $1 in 1990. Son sold in
> 2006. Would the house basis be the FMV on the date he bought
> or really looks like inherited?
Sorry to pour cold water on your parade, but the situation
(as often happens in DIY estate planning) is definitely NOT
to your advantage.
> Parent transfered house to son for $1 in 1990.<
In reality, the parent GAVE the house to the son, at (FMV -
$1) and should probably have filed a Gift Tax return (form
709) in that year. Son's basis in the house is the same as
the adjusted basis of the parent. If the house has been
owned for some time by the parent, this is likely to be
quite LOW.
> Son sold in 2006.>
And son will probably owe a large capital gains tax bill on
the (large) profit. Too bad.
> Would the house basis be the FMV on the date he bought or really looks like
inherited?
Neither one. Son's cost basis is most likely the same as
that of the parent (or $1), and has nothing to do with FMV
on the date of transfer. Since the parent was still alive at
the time of transfer, there is NO inheritance involved here.
As I said at the beginning, DIY estate planning often has
undesirable (and unforseen) consequences. Maybe this will be
a lesson to you.
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<< The foregoing was not intended or written to be used, >>
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Posted by Phil Marti on December 28, 2006, 9:13 pm
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> Parent transfered house to son for $1 in 1990. Son sold in
> 2006. Would the house basis be the FMV on the date he bought
> or really looks like inherited?
His basis is the parent's basis since this was a gift.
Do-it-yourself estate planning strikes again. Had the son
actually inherited the house, his basis would be the FMV on
the parent's date of death.
Phil Marti
Clarksburg, MD
<< ======================================================= >>
<< 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 Paul Thomas, CPA on December 28, 2006, 9:13 pm
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> Parent transfered house to son for $1 in 1990.
> Son sold in 2006. Would the house basis be
> the FMV on the date he bought or really looks
> like inherited?
It looks like parents gifted house to son. Therefore the
basis is the parents basis + $1 he paid.
There would be, of course, differing answers if more
information about the house, who lived there for the past 16
years, was it rented, etc. were known.
--
Paul Thomas, CPA
paulthomascpapc@bellsouth.net
<< ======================================================= >>
<< 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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