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My Father just gave me his house, currently valued at $50,000.00, as a gift. How much will he have to pay in gift tax?

San Antonio, TX |

I think I understand that as it was a gift; I do not have to pay federal tax on his gift. But he will have to file form 709 and pay a gift tax. I'm trying to figure out how much he will owe in gift tax?

Attorney Answers 3

Posted

He owes nothing in gift taxes. First, the first $13,000 of this gift qualifies for the annual donee exclusion. As to the remaining $37,000, he will use some of his $5 million lifetime exemption. So there is no gift tax to be paid. He will in fact have to file a Form 709.
As an aside, you do realize that you must use a carryover basis (what dad paid plus improvements) to determine the gain if you later sell this property. If you received this house at his death you would have gotten a step up in basis to the date of death value (assume $50,000). If you later sell you would have little or no gain. So if dad paid little for the house and made only minor improvement, the gift made will result in higher capital gains if you sell it later.

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Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is sjfpc@comcast.net . For further tax advice check out his website at www.sjfpc.com . and his blog at >

LEGAL DISCLAIMER Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is sjfpc@comcast.net , his website is www.sjfpc.com. and his blog is <http://frommtaxes.wordpress.com/> Mr. Fromm is ethically required to state that the response herein is not legal advice and does not create an attorney/ client relationship. Also, there are no recognized legal specialties under Pennsylvania law. Any references to a trust, estate or tax lawyer refer only to the fact that Mr. Fromm limits his practice to these areas of the law. These responses are only in the form of legal education and are intended to only provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that if known could significantly change the reply or make such reply unsuitable. Mr. Fromm strongly advises the questioner to confer with an attorney in their state in order to ensure proper advice is received. By using this site you understand and agree that there is no attorney client relationship or confidentiality between you and the attorney responding. This site should not be used as a substitute for competent legal advice from a licensed attorney that practices in the subject area in your jurisdiction, who is familiar with your specific facts and all of the circumstances and with whom you have an attorney client relationship. The law changes frequently and varies from jurisdiction to jurisdiction. The information and materials provided are general in nature, and may not apply to a specific factual or legal circumstance described in the question or omitted from the question. Circular 230 Disclaimer - Any information in this comment may not be used to eliminate or reduce penalties by the IRS or any other governmental agency.

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As the donor your father will have to file a gift tax return. He is entitled to an annual exclusion of $13,000 for gifts made to you in a given year, and it could double to $26,000 if he is married. The difference must be reported on a gift tax return. Your father has a life time gift exclusion that is currently $5,000,000 and he can use this to exclude the balance of the gift if he has not already used up this exclusion. If he has sufficient exclusion available, then he should owe nothing in gift tax. Your basis in the property for income tax purposes will be a carry over basis -- the same basis that your father had immediately before transferring the property to you.

Any individual seeking legal advice for their own situation should retain their own legal counsel as this response provides information that is general in nature and not specific to any person's unique situation. Circular 230 Disclaimer - Advice given in this response cannot be used to eliminate penalties with the IRS or any other governmental agency.

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Posted

If gift taxes or estate taxes are an issue due to prior gifts, and assuming he will stay in the house for a few years, you may want to investigate the use of a QPRT (qualified personal residence trust).

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