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nh_624
Returning Member

Real Estate Gift

Hello,

My parents gifted me their house in 2010.  Now they want me to add my two brothers on the title.  At the time they gifted me the house it was about $90,000.  Now, the house is worth about $415,000.   What are my tax consequences if I add them on the title? What do I need to file?  Is it better to just make a contract that after parents don't live in the house anymore which could be 10-15 years, that I would sell the house and after paying all taxes to split the profit.  Please advice.

Thank you

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7 Replies

Real Estate Gift

You might want to discuss your scenario with estate planning counsel.

 

See https://www.avvo.com

 

Perhaps, look into a TOD deed (if permitted in the state) or a deed from your parents reserving a life estate, but discuss these options with a local attorney.

nh_624
Returning Member

Real Estate Gift

Besides of making the decision whether I should do another contract instead of adding to the deed, could you please explain the other parts of the question in regards to the tax implications if I do add them to the title now.

Real Estate Gift

Assuming you now own the house in fee simple absolute (i.e., you're the sole owner without restrictions or reservations), then you would be making a gift if you added your brothers to the deed.

 

There would likely be no federal tax consequences, but you would also have to file a gift tax return (Form 709).

 

See https://www.irs.gov/instructions/i709#en_US_2023_publink16784xd0e314

 

[note that the annual exclusion is $18,000 for 2024]

nh_624
Returning Member

Real Estate Gift

How would I calculate the basis for myself and my brothers if I do equal 3 split of the property.  Also, do I have to file Form 706 or where is the gift basic exclusion amount is calculated?

Real Estate Gift

You would file Form 709, not Form 706, and the annual exclusion would be reported on that form (currently $18,000 per donee per year).

 

The gift to your brothers would be 2/3 of the fair market value on the date of the gift (1/3 of the FMV to each brother).

 

The basis for your 1/3 would be a carryover basis from your parents (i.e., 1/3 of your parents' basis, so you would divide your original basis by three).

nh_624
Returning Member

Real Estate Gift

I am still unclear if I have to owe gift tax after the $18,000 exclusion to each of my brothers?  I never gifted real estate to anyone else before.   Isn't there a $12,920,000 gift exclusion for real estate?  I am also planning to transfer my own personal residence into a revocable living trust for the benefit of my children.  Is this also considered a gift when I put my personal residence into a trust and is it also added to the $12,920,000 exclusion?

Real Estate Gift


@nh_624 wrote:

I am still unclear if I have to owe gift tax after the $18,000 exclusion to each of my brothers? 


No, you just need to file a return (Form 709) if the gift is more than $18,000 (for 2024).

 

 

 


@nh_624 wrote:

Isn't there a $12,920,000 gift exclusion for real estate? 


There is a $13.61 million lifetime exclusion, and it applies to all of your assets.

 

 

 


@nh_624 wrote:

......Is this also considered a gift when I put my personal residence into a trust ....


No, not if the trust is the typical, revocable trust (aka living trust).

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