<< General Disclaimer: > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << It cannot be used by any taxpayer for the purpose of > << avoiding penalties that may be imposed on the taxpayer. > << ================================================== ===== >
"KSB" <nospam[at]nospam.net> wrote

- quote -

Yes.

and
- quote -

No.

Capital gains would be based on her (now your) cost basis
(less depreciation you take) + any improvements you make.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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<< General Disclaimer: > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << It cannot be used by any taxpayer for the purpose of > << avoiding penalties that may be imposed on the taxpayer. > << ================================================== ===== >
"KSB" <nospam[at]nospam.net> wrote:

- quote -

No. If she gives it to you, your basis is her basis for all
purposes. That may well be her cost, but it may be
something else depending on whether she made additions that
add to the basis, or ever rented it out, which would reduce
the basis.

Stu

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As I understand your answer, I will have 2 basis for tax purposes:

1. Her cost for the purposes of depreciation and
2. Fair market value at the time of transfer for capital
gains if and when I sell.

Am I correct.

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"Paul A Thomas" <taxman[at]negia.net> wrote:
- quote -

Right. A much better alternative would be to add you as a
joint tenant. You become an owner, but your mother is
treated as owning the whole thing for tax purposes. When
she dies the value of the property will be included in her
estate, but your basis will go up to whatever the market
value is, saving income tax.

If the law doesn't change in the mean time.

Or you could buy it from her now on low interest and low
payments. That way you will also get the benefit of higher
tax basis.

- quote -

If you buy it from her and lease it back, the taxable income
of her payments to you would be offset by the interest you
are paying to her. She will have taxable income, though, in
the amount of the interest you pay to her.

Oh, and make sure you have a written lease that goes only
for a year at a time. Otherwise the IRS will want to
include the property in her estate for estate tax purposes
if she is still there when she dies. They may want to do it
anyway. So be careful.

Stu

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KSB" <nospam[at]nospam.net> wrote:

- quote -

Back up to the gifting of the condo. That is a taxable
event in itself. You can give a gift of up to $11,000 USD
(in 2004) without paying a gift tax. After that amount, the
giver of the gift is taxed, not the receiver. And if you're
thinking about "buying" it at $1 to get around the gift
rule, that won't work either. The buy / sell price would
have to be close to fair market value or it could be viewed
as a "gift."

To answer your question... if you bought the condo for fair
market value, and rented it to your mother at a fair market
price, then yes, you could deduct any related expenses
(including depreciation) against any income from the
property.

On the bright side, at least you would have a trustworthy
tenant in your property taking care of your investment!

Hope this helps,
Russell Tuncap, CMA, CPA
www.tuncap.com

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KSB wrote:

- quote -

You might want to consult local competent tax help , either
an EA (Enrolled AGent) or CPA (Certified Public Accountant)
for an analysis of the tax implications of this for the
next, say.... five years.

But if it is a true rental, you have income and expenses.
And you may deduct depreciation based on......... NOT 300k!,
but her cost in the property. (You figured it was too good
to be true, eh what?)

ChEAr$,
Harlan Lunsford, EA n LA

Moderator:
You omitted Tax Attorney. Was that bait to get a response
from Stu? <g
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"KSB" <nospam[at]nospam.net> wrote

- quote -

She will have to file a gift tax return. There may or may
not be any taxes due with that return.

Since it's being gifted to you, her cost basis now becomes
your cost basis.

- quote -

The expenses that are related to the rental property are
deductible against the rental income, and you can depreciate
the building (but not the land). Remember that her cost
basis is now your cost basis. So the amount applicable to
the building portion might be quite small.

Also, it sounds like you are renting at below market rates.
Since the rental is to a related party, your losses may be
limited.

Consult an attorney in real estate law (both of you) to see
if this can be structured better to provide better tax
advantages to both of you.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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This is the situation. My mother is giving me (gift) her
condo apartment (market value about 300K). I plan to rent it
back to her for an amount to cover costs (maintenance,
taxes, utilities). Since this is now a rental property, can
I deduct these costs from my taxes. Also, can I deduct
depreciation.

Thank you in advance.

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