topic I will gift a house I owned lived in to my niece. It is outside US. Will a tax (cgt/other) be imposed? Meanwhile my sister will send to my US bank a large sum for my use. in Deductions & credits

I will gift a house I owned lived in to my niece. It is outside US. Will a tax (cgt/other) be imposed? Meanwhile my sister will send to my US bank a large sum for my use.

circus31 — Thu, 06 Jun 2019 13:07:13 GMT

I want to gift my old house to my brother or his daughter, does this on its own provoke tax? At the same time my family will send me and my husband a large sum of money for us to buy a house in the NJ. Will this be taken as nevertheless a sale of property and therefore tax payable on it

1.when you give a gift of more than $14,000 per year per...

Opus 17 — Thu, 06 Jun 2019 13:07:16 GMT

1.when you give a gift of more than $14,000 per year per person, you are required to file a gift return. No taxes actually owed, unless your lifetime gifts plus estate exceed $5 million. But you have to file the report.

2. If you receive gifts from foreign persons totaling more than $100,000 per year, or from a foreign corporation of more than $14,000 per year, you must file a report using form 3520. No tax is owed, but the IRS requires the form in order to track large foreign transactions, to help them find things like money laundering etc.

3. It sounds like you are actually selling your house to your sisters family, and trying to disguise the sale through the use of reciprocal gifts. If this is what you are doing, and if the IRS figures it out, you will be responsible for capital gains tax on the sale of the house, plus substantial penalties for filing a false tax return. Even if this is not what you are doing, and these are legitimate independent gifts, it will look to the IRS very much like you are trying to disguise a sale, and if the IRS comes after you, you will have to put in substantial effort to defend yourself and prove that these are legitimate, independent gifts.

Yes. But, probably, no tax will be due. It’s best explain...

Hal_Al — Thu, 06 Jun 2019 13:07:19 GMT

Yes. But, probably, no tax will be due. It’s best explained by example.

Example 1: You have a cost basis of $100,000. The house is currently worth $150,000. Your sister sends you $60,000 after you deed the house to your niece. The $60,000 is your “sale” amount. But, since the $60,000 is less than your cost basis, you do not have a reportable capital gain*. You have given a “gift of equity” of $90,000 (150K-60K) to your niece. Your sister has given the niece a $60,000 gift. Your niece’s cost basis is your $100,000 cost basis (not the $150,000 current value).

Example 2: You have a cost basis of $100,000. The house is currently worth $150,000. Your sister sends you $110,000 after you deed the house to your niece. You have a tax reportable capital gain of $10,000. Your sister has given the niece a $110,000 gift. You have given a “gift of equity” of $40,000 (150K-110K) to your niece. Your niece’s cost basis is $110,000 (not $150,000).

*You are not allowed to claim a capital loss on this transaction.

And if the house is worth $150K and the sister's "gift" i...

Opus 17 — Thu, 06 Jun 2019 13:07:22 GMT

And if the house is worth $150K and the sister's "gift" is $150K, then you have given no equity to the niece and you owe capital gains tax on the entire gain of $50K, which is what you would owe if you reported it as a sale.

Bottom line, don't try to pretend they are two unrelated gifts that just happened to occur at the same time.