Which amount is correct for filing a gift tax form?

[JPH]

My home appraised for 142K but needs a lot of repairs. I am selling it to my son for 115K and in addition, I am also paying 23K for the down payment That  23K is  listed on the loan paperwork as a gift of equity, leaving his actual loan amount at 92K. I am confused as to which number should be reported as a gift of equity...142K minus 92K = 50K  or  115K minus 92K = 23K. Plan to speak to a tax accountant but any input would be appreciated. Thanks!

[MichaelL1 · Accepted solution]

The gift is the home value at time of gift $142K less what you are selling it for of $115K or $27K plus the $23K down payment or $50K total.

This would be for gift tax purposes, now the closing agent may list only the gift equity of $23K at closing.

Share there numbers with your accountant.

[JPH]

Thank you!

[ScruffyCurmudgeon]

Form 709 is the Gift Tax return - It is not  part of the Income Tax system.

Consider this:

• Assume you are not married, for example, and you are giving where the estimated Gift is some $50,000.
• If your son is married, you are allowed in any one year to give $15,000 excludable gift to any other one person, but your son is married, so you could exclude $30,000.
• Now assume that you are married, and both you and your wife could give and exclude a total of $60,000, thus avoiding the need to file Form 709 at all.  However, it is still best to keep good documentation of this.
• If this last step is your situation, be careful to document the "split gift" so that it is clear that two donors are giving, in this case, $25,000 split between two recipients.
• What may not be obvious is that once you have filed a first Form 709, you necessarily have to file one every year for the rest of your life if an Estate Tax remains in existence, even if your current estate is less than the current excludable estate, since one never knows what an uncontrolled congress or administation will do with Estate Tax in the future.  The annual Form 709 documents the Lifetime Gifts made to the then-current date.