Investors & landlords

Overall, you need to seek legal advice from a real estate attorney or real estate professional well versed in foreign property ownership. Since this is foreign rental property I am confident there is much more involved in this than I am aware of. Especially if the other owner's are not U.S. Citizens or legal immigrants with a green card and social security number or ITIN. Gift reporting requirements to a foreign person are not necessarily the same as they are for gifts to a U.S. Citizen.

my first question is on the fair value of the property - how is this determined? Can I hire a third party certified appraisal to obtain the FV for the properties and list them on the form? are there any requirements on the selection of such company?

You should get an official appraisal as soon as possible, unless you have some other documentation to somehow prove the FMV of the property on the date the original owner passed away. (Not the date you inheritied it. I.e.; not the date your name was put on the property deed.) Other than the appraiser be qualified/licensed, there is no special requirement. Note that a tax bill to prove FMV is generally not enough, unless you can show there is absolutely no other way possible to determine FMV. That's because in general (at least in the U.S.) the tax value of a property is significantly less than the FMV the property would sell for. Also, a tax value appraiser generally does not enter the property. Tax value is commonly determined by the square footage of land and the square footage (or footprint) of the property on that land. So a tax appraiser is not appraising a property's resale value. They are appraising the tax value. The tax value is commonly 30% (more or less) below the property's sale value.

if I was to sign a side agreement with my dad, and give away my 1/3 rental income rights to these properties, that is for me to NOT receive any income from these properties and for him to pay fully the EU income taxes on my tax amount - would this trigger any tax issues?

You don't give away your income.Just giving away the income does not relieve you of your obligation to pay property taxes or any other debt (such as a mortgage, utilities, upkeep costs, etc) and would still require you to report your share of income on  your tax return, and pay taxes on it "before" you gift that income to anyone else.  So long as you are a legal owner of the property, you would be gifting your income each and every year.

While it would not trigger tax issues per-se (but it will in the year the property is sold or otherwise disposed of, depending), you would need to completely give away any and all ownership claims you have to the property. This as you know, would be considered a gift. If the value of your gift given in any one tax year exceeds $15,000 to any one person, then you are required to report your gift to the U.S. Treasury Department on IRS Form 709 - Gift Tax Return.

Now don't let the name of that form mislead you. You will *NOT* pay any taxes on your gift. This is merely a reporting requirement that is not a requirement of the IRS. It is a requirement of the United States Treasury Department, of which the IRS is only a part of. The IRS Form 709 is *NOT* filed with your tax return, and is *NOT* included in any version of TurboTax, since it has nothing to do with taxes per-se.

Why they call it an "IRS" form 709 makes one think it's an IRS requirement. It is and it isn't. The reporting requirement is actually levied on the IRS by the Treasury Department who gets their marching orders from Congress. So I can only fathom that's why it's an "IRS" form.

Basically, you would need to give away your rights to any ownership in that property.

Overall, you need to seek legal advice from a real estate attorney or real estate professional well versed in foreign property ownership. Since this is foreign rental property I am confident there is much more involved in this than I am aware of. Especially if the other owner's are not U.S. Citizens or legal immigrants with a green card and social security number or ITIN. Gift reporting requirements to a foreign person are not necessarily the same as they are for gifts to a U.S. Citizen.