Taxes on transfer of a lake cabin for $?

[genemisk]

Situation: I and 5 siblings are legal owners of a lake cabin in Wisconsin. We inherited (via transfer of ownership) from our folks about 20 years ago. Now 3 of 6 owners are going to transfer our ownership shares oto our nephew / niece, who are married. Each of 3 will get $ 34k. 

Question: do we have to pay taxes on the $ 34K as misc. income??  OR I was thinking: we / owners are gifting the cabin to nephew / niece; and the $ 34k is a gift to us; hence, we would pay no taxes, as we consider it a gift for a gift. $17k x 2 = $ 34k as gifts are tax free. What is your opinion / ruling on this situation?

[tagteam]

You need to figure your basis to determine whether or not there is a gain on the sale.

If the cabin were being held for personal use, you would have capital gain, not ordinary income.

Further, there would be no gift if the cabin is going to be sold to the nephew/nice at fair market value.

[KarenL4]

Hi, genemisk,

What a lovely thing to do for your family.

First, let me say there are various types of taxes.  You may have a transfer tax on the property in WI and that is out of scope for us to answer here, however, here is a site that has more info on that. Secondly, there is a gift tax return required when you are gifting more than $18,000 in 2024 ($36K as a married couple).

Lastly, there is generally no tax to you on either gifts or inheritance when you receive the gift or inheritance (there may be when/if you sell). I am unsure from your question whether you inherited the property which would get a "stepped up" basis or if your parents transferred the property when they were alive (which would be a gift).  Gifts typically take on the basis of the owner, but it can get more complicated if the fair market value has decreased to a value lower than the prior owner's basis.  This article talks in more detail.

The likely answer is you are not paying income taxes on the transfer of the gift, you may have to consider a gift tax return and consult WI rules for whether you pay a transfer tax.  Since I am not sure about some of your question, please do follow up if I haven't answered you adequately!

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Regards,

Karen

[Mike9241]

if money is changing hands, it is no longer a pure gift. if the money is kess than the fair value. then there seems to be part gift part sale. consult a pro