turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

tax consequences on gifted investment real estate:

wish to give Investmnet real estate i have ownes for a long time to my daughter. I do not wish to wait until death

Investment real estate ..basis  $150,000   FMV   $600,000. has a non recourse mortgage  of $300,000 what are the tax implications of gifting this to my child with the mortgage in place. 

 

 

x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

6 Replies

tax consequences on gifted investment real estate:

The mortgage doesn’t factor into it.  If you give a gift they get the same cost basis as you.  If they inherit it they will get a step up in value on the date of death.  Better think about it.  And see a financial planner.

ThomasM125
Employee Tax Expert

tax consequences on gifted investment real estate:

While the lifetime federal gift tax exemption is $13.61 million dollars, the annual exemption if $18,000. So, you should file a gift tax return if you make the gift, even though it won't be taxable until your lifetime gifts exceed $13.61 million.

 

As mentioned by @VolvoGirl if you allowed your daughter to inherit the property, she would have a basis equal to the fair market value on the date or your demise, as opposed to your basis of $150,000 if you gifted it now. So from a tax stand point it would be better not to gift it to her, but let her inherit it.

 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

tax consequences on gifted investment real estate:

Really, REALLY bad idea.  My only saving grace in inheriting rental property I just sold was the step-up in basis which gave me minimal gains, but after a LOT of depreciation recapture and passive losses.  If I had to deal with a cost basis from 1982 I'd be wiped out.

 

And as an aside, becoming a landlord because someone else wanted to be a landlord isn't all roses if the recipient isn't interested in the job.  Things happen, of course... but it's a lot easier to inherit a trust or IRA or even family home than someone's investment property.  In addition to talking to a financial planner and/or learning about the effect of step-up in basis, have a talk with your daughter about her wishes as well so everyone can make a well-informed decision.

tax consequences on gifted investment real estate:


@tomwilloughbyestate wrote:

mortgage  of $300,000

 

gifting this to my child with the mortgage in place. 


 

What is happening to the $300,000 mortgage?  Are you paying it off?  Is your daughter assuming (taking over) the mortgage (and if so, is the mortgage company okay with it being transferred to her)?  Something else?

tax consequences on gifted investment real estate:

Yes my daughter is assuming the mortgage with the banks permission.

tax consequences on gifted investment real estate:

That means you are essentially selling it for $300,000.  

 

If the Basis is $150,000, that means you will have a $150,000 taxable gain from the sale.  How that $150,000 taxable gain will affect your tax return will depend on the rest of your circumstances (amount and kind of other income, which state you live in, which state the property is in, and much more).

 

You also referred to it as "investment" real estate.  In the event it was rental property, some of that gain will be taxed at a higher rate due to the depreciation you were able to claim.

 

As was noted by others, you will need to file a Gift Tax return reporting the $300,000 gift.

 

 

Your daughter's Basis will be $300,000 so whenever she sells, she will have a large gain (hypothetically, if she sold it immediately for $600,000, she would have a $300,000 taxable gain).  But if she is making that home her Principal Residence, that has special rules that could reduce (or possibly eliminate) the taxable gain if/when she sells.

message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question