@M-MTax wrote:
I'm not sure how you did the math but in 2010 the annual gift tax exclusion was $13k. For both parents that would be $26k. In 2011 and 2012 you might add another $26k per year. The total at the end of 2012 could be $78k. From 2013-2017 the exclusion would have been $28k per couple (total of $140k) and 2018-2021 it would have been $30k per couple. I'm not going to continue because I think it's clear that by 2024 they would have given away their entire interest in the property to the son.
Might want to execute a QC deed to the son before the sale. No gift tax return if the 2/3 interest had been entirely gifted under the exclusion each year since 2010.
The gifts add up to more than the cost, but not more than the FMV at the time of sale (stated as $600,000). My tax calculation relies on their statement that the son owns 2/3. That may or may not be correct, it's up to them to support that with evidence.
The real problem is that giving the property to their son turns a non-taxable sale of a personal home for the parents, into a taxable sale for the son.
I would rather suggest the son give the home back to the parents, so they could sell the home and use the exclusion, and then parents give their son whatever amount of money they think is appropriate. The gifts must be reported but won't be taxed unless the parents' lifetime gifts are more than $13 million. Unless the parents already have gifts more than that amount, in which case they really should be working with a tax professional.
The parents probably should see a tax professional ASAP if they want to find a legal way to avoid hitting their son with $25,000+ in capital gains taxes.
