Mother in law gifted me 1/2 a rental house we were...
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Rwd123
New Member

Mother in law gifted me 1/2 a rental house we were 50/50, I now own 100%. I figured my side out, but how do I adjust her tax return to now show she no longer owns it?

We owned it 50/50 and did this via quit claim and a loan refinance so now loan is 100% in my name title 100% in my name. I guess I'll also have to have her file a form 709 git tax form seperatly.
4 Replies
martinmarks1919
Level 8

Mother in law gifted me 1/2 a rental house we were 50/50, I now own 100%. I figured my side out, but how do I adjust her tax return to now show she no longer owns it?

Definitely have her file a 709....and make sure she gets help with that. Then you have her convert the house to personal use on the day she gifted it to you to stop depreciation.

Mike9241
Level 6

Mother in law gifted me 1/2 a rental house we were 50/50, I now own 100%. I figured my side out, but how do I adjust her tax return to now show she no longer owns it?

Special rules apply to property acquired as a gift. The determination of the basis for depreciation purposes and the amount of deductible loss on the eventual sale of the asset are treated differently for property received as a gift.


The donor’s adjusted basis plus a portion of the gift tax paid by the donor is used by the donee to establish their depreciable basis in the gift. The doneer starts the depreciation recovery period as of the date of the gift, using the applicable convention and method.

Example: Grandpa decided it was time to abandon his summer home and move permanently to Florida. On April 30, 2015, he gave his house to his niece, Peggy. The FMV of the property at that time was $250,000. Grandpa’s basis in the home was $200,000. He filed Form 709, U.S. Gift (and Generation-Skipping Transfer) Tax Return, but did not owe any gift tax.

Peggy decides to use the house as rental property. On her 2015 return, she reports the acquisition date as April 30, 2015, and a beginning basis of $200,000. Residential real estate is depreciated over 27.5 years using the mid-month convention and the straight-line method.

For gifts received after 1976, a portion of the gift tax that was paid on the gift is added to the basis. This is calculated by multiplying the gift tax by a fraction. The numerator of the fraction is the net increase in value of the gift, and the denominator is the amount of the gift. The net increase in value of the gift is the FMV of the gift less the donor’s adjusted basis. The amount of the gift is its value for gift tax purposes after reduction for any annual exclusion and marital or charitable deduction that applies.

Example: Use the same facts, except Grandpa paid $2,000 for the gift tax due with Form 709. The net increase in the value of the gift was $50,000 (the FMV of $250,000 less Grandpa’s basis of $200,000). The amount of the taxable gift for gift tax purposes was $236,000 ($250,000 FMV − $14,000 annual exclusion for 2015). The amount of the gift tax that is added to Peggy’s basis is $424 ($2,000 gift tax × ($50,000 net increase in value ÷ $236,000 taxable gift amount)).

If the FMV of the property at the date of the gift is less than the donor’s adjusted basis, the depreciable value is still equal to the donor’s adjusted basis plus the applicable portion of gift tax paid. However, if the taxpayer who received the gift sells the property at a loss, the basis for calculating the loss is the FMV of the property at the time the taxpayer received the gift plus or minus any required adjustments to basis while the taxpayer held the property.

If the result is a loss when the adjusted basis is used to calculate a gain and the result is a gain when the FMV is used to calculate a loss, the taxpayer has neither a gain nor a loss on the sale of the property.

 

Carl
Level 15

Mother in law gifted me 1/2 a rental house we were 50/50, I now own 100%. I figured my side out, but how do I adjust her tax return to now show she no longer owns it?

I'm responding to two of your questions here. First, let me clarify that UNDER NO CIRCUMSTANCES AND WITH NO EXCEPTIONS will you convert ANYTHING on this rental to personal use on your mother's tax return. There's no need, and it's an absolute waste of time.

How do I adjust her tax return to now show she no longer owns it?
On her tax return start working through the rental property. In the Property Profile section one of the screens has a selection on it for "I sold or otherwise disposed of this rental property in 2020" Select that option and continue working things through.

All rental income received by your mother in 2020 gets entered in the rental income section of her return.

All expenses incurred by your mother gets entered in the rental expenses section. She can only claim her share of those expenses incurred up to the date of the quit claim deed. (when her half was gifted to you)

Then you start working through each individual asset one at a time. You must do this for each individual asset listed in the Sale of Property/Assets section.

On the screen that asks "Did you stop using this asset in 2020?" select YES.

Enter the date the quit claim deed was recorded at the courthouse.

On the "Special Handling Required?" Screen, read all the small print on that screen so you will understand why I am telling you to select YES. Then click YES, and continue.

Finish working through that asset, then start working through the next asset in the list just like you did the previous one.

TAKE SPECIAL NOTE: If you have an asset for "financing fees" (or something similar) that gets handled a bit different. You should be able to figure it out as you work it through. If not, then help me to understand where you're confused or not sure, and I"ll assist you with 'getting it right".

. I guess I'll also have to have her file a form 709 git tax form seperatly.

Actually, it's the giver of the gift (your mother) and not the recipient (which is you) that is required to file the IRS Form 709. Now the name of that form can be misleading. Nobody will be "any" taxes on the gift. All your mother is doing by filing the 709, is meeting a legal requirement. That is all.

That 709 is mailed separately from your tax return, as it can not be e-filed and is not mailed to the same address as the tax return is (if you elect to mail the return). The actual mailing address for the 709 is in the instructions for completing the 709.

The form itself is at https://www.irs.gov/pub/irs-access/f709_accessible.pdf

Instructions are at https://www.irs.gov/pub/irs-pdf/i709.pdf and the mailing address is on the top left of page 5 of those instructions.

 

martinmarks1919
Level 8

Mother in law gifted me 1/2 a rental house we were 50/50, I now own 100%. I figured my side out, but how do I adjust her tax return to now show she no longer owns it?

Enter the date the quit claim deed was recorded at the courthouse.

That wouldn't be the date of the gift in almost all cases @Carl......you don't seem to understand the law. Recording a deed is a formality that gives the world constructive notice that a transfer has been made and nothing more. The date of the gift would be earlier than that.....at the latest on the date when the deed was drafted.....the date the deed was recorded doesn't control when the gift was made.

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