"Stuart A. Bronstein" <spamtrap[at]lexregia.com> wrote:

- quote -

Hmmm.

Sounds as if I need to both read more, and also check with a
professional before setting this up.

Thanks for pointing out that pitfall.

The "sale" would very definitely not qualify as a tax-free
event.

--ron

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Ron Rosenfeld <ronrosenfeld[at]nospam.org> wrote:

- quote -

It's certainly allowed. But you have to be careful not to
make it look like you are setting it up in advance
necessarily to do it every year, even if you do. Each
annual forgiveness should be individual and not promised in
advance. One approach would be to have them actually make
one annual payment by check, and you either send it back or
keep it and write "cancelled" on it. Oh, and make sure you
take a mortgage in the property to insure payment.

There is one other thing. A sale means taxable income. If
you don't qualify for the exclusion for sale of a residence,
your forgiveness of purchase payments will be taxable income
to you as if you had actually received money. Or your kids
could be taxable on that money as cancellation of debt
income.

Stu

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Ron Rosenfeld <ronrosenfeld[at]nospam.org> wrote:

- quote -

Some more thoughts on this issue, that just occurred to me.
To avoid yearly appraisals and deeding, as was a suggestion,
why not just sell them the property at FMV (one appraisal,
one deed) and take back a mortgage at a reasonable interest
rate.

Then it would just be a matter of forgiving $48,000/year of
the amount due on the mortgage, until it is "paid off".

Is that allowable?
--ron

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"Stuart A. Bronstein" <spamtrap[at]lexregia.com> wrote:
- quote -

Thanks.

You've given me some things to ponder.

Best wishes,
--ron
--ron

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Ron Rosenfeld <ronrosenfeld[at]nospam.org> wrote:

- quote -

For this purpose not being in a community property state can
help you. But you really should consult a local tax advisor
to be sure.

- quote -

There is basically a three year period after filing a gift
tax return that the government has the power to challenge
that return (assuming it wasn't fraudulent).

If you don't file a return, the government can in theory
audit your gift at any time. If they do that they could
determine, for example, that the gift was all made in the
first year, even though deeds were given for less than the
exemption amount, because the plan to make the gifts was
created at that time.

Or they could decide that your kids really had no control
over the property when you made the gifts, so the gifts were
of a future interest, which would not then qualify for the
annual exclusion.

These kinds of things are not likely, but they are possible.
And filing a gift tax return, if you can do it in a way
that doesn't make them even more suspicious, is cheap
insurance.

I'm sure others here, those who actually prepare tax
returns, will have more to add.

Stu

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"Stuart A. Bronstein" <spamtrap[at]lexregia.com> wrote:

- quote -

Thank you for that information.

Although we are not in a community property state, we do own
all significant stuff jointly. The only exceptions are or
IRA's and our vehicles.

Could you explain what "statute of limitations" means in
this situtation? I don't know what it means with regard to
gifting or irrevocable trust.

--ron

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Ron Rosenfeld <ronrosenfeld[at]nospam.org> wrote:

- quote -

There are different kinds of trusts and they are useful for
different kinds of purposes. The most popular, a revocable
living trust for estate planning purposes, is, as you
suggest, of little practical value until both spouses have
died. However by that time it's too late to save the tens
or sometimes hundreds of thousands of dollars that can be
lost to taxes and probate courts.

The reason I suggested an irrevocable trust is to have a
situation in which filing a gift tax return is required, to
start the statute of limitations. There may be another
option. If the gifts are going to be more than $12,000 per
donnee, and you don't live in a community property state,
you and your wife can file a gift tax return and elect to
"split" the gift. That is that the gift be considered half
from each of you even though tecnically the money not belong
to each of you equally.

Stu

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"Stuart A. Bronstein" <spamtrap[at]lexregia.com> wrote:
- quote -

Yes, I should have typed "appraisals", and not "appraisal".

Irrevocable trust? Well, one of these days I really have to
learn about trusts, and how they can help me and my wife.
One rule that has served me well over the years has been to
not put my money into anything I don't fully understand.
And I've never taken the time to really understand trusts.
Probably because what little I've read suggests to me that
they are of more value to those to whom I give money (heirs
or charities) than to myself or my wife. That may be
incorrect, but that suggestion has removed the urgency of
acquiring more knowledge.

Thanks for your suggestions.

Best wishes,

(Frequently wrong, never in doubt)
--ron

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Ron Rosenfeld <ronrosenfeld[at]nospam.org> wrote:
- quote -

Assuming you mean a yearly appraisal, that should do it.

You might also want to consider creating an irrevocable
trust to which you make modest gifts (e.g. $100) each year.
This would require a gift tax return to be filed, which
would start the statute of limitations running for each of
those years.

Stu

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"Stuart A. Bronstein" <spamtrap[at]lexregia.com> wrote:

- quote -

It sounds as if it should just be a matter of retaining the
appraisal, and filing an appropriate deed each year showing
the ownership transfer.

--ron

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Ron Rosenfeld <ronrosenfeld[at]nospam.org> wrote:
- quote -

The potential problem with gifting is that the IRS could
come back and second-guess you in years to come. If you
don't file a gift tax return the statute of limitations
never runs on the gift.

But if you're careful you shouldn't have a problem.

Stu

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Harlan Lunsford <hnslunsford[at]bellsouth.net> wrote:

- quote -

I've not had any problems with joint ownership of other
properties.

I've sold an unrelated person a 50% ownership in a property
I owned, in exchange for cash.

Is there some reason that gifting cannot follow a similar
process?

--ron

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Harlan Lunsford <hnslunsford[at]bellsouth.net> wrote:
- quote -

Not necessarily. If they have an approximate cost of the
property and be sure the amount tranferred is well under the
annual exclusion amount, I'd think they'd be safe.

E.g., property worth $100,000 this year (based on an
informal opinion by a real estate broker) and with an
exemption amount of $48,000, give a 25% interest.

Stu

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Ron Rosenfeld wrote:
- quote -

You're talking here about one property. How do you give it
over several years? Have it surveyed and deed portions of
it each year? Cost prohibitive.

ChEAr$,
Harlan Lunsford, EA n LA

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Ron Rosenfeld <ronrosenfeld[at]nospam.org> wrote:
- quote -

Yeah, but if you don't reduce the lifetime exemption your
heirs might not need Harlan's services to do an estate tax
return. ;-)

Stu

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"BeanTownSteve" <s.cronmiller[at]gmail.com> wrote:
- quote -

Depending on the size of their taxable estates, it may be
better to get it out of their estates now even if the kids
don't get a stepped up basis. For the same amount of money
the estate tax is going to be higher than income tax -
particularly long term capital gain.

That said, for the large majority of estates, because of
their size, the stepped-up basis is the better choice.

Stu

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Harlan Lunsford <hnslunsford[at]bellsouth.net> wrote:
- quote -

No tax currently. But if they have an estate that's large
enough, it could increase the amount of estate tax they will
eventually have to pay.

The problem with gifting over time is that you either need
to get an appraisal each year when you make the gift, or be
sure you give an amount low enough that there will be no
question that it's less than the annual exclusion amount.

In this case there are two donors and two donees, which
means (at the current level for the exclusion) they can give
up to $48,000 in value to them per year.

Stu

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"BeanTownSteve" <s.cronmiller[at]gmail.com> wrote:

- quote -

No, the reason we would consider gifting them the property
would be if they were going to build a home and live there.
Otherwise, it's up for sale.

--ron

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Harlan Lunsford <hnslunsford[at]bellsouth.net> wrote:

- quote -

I thought that if we did that, we would reduce the lifetime
exclusion; whereas if we split it over a few years, we could
avoid that issue.

--ron

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Ron Rosenfeld <ronrosenf...[at]nospam.org> wrote:

- quote -

<snip
No one seemed to mention........ If they need it now that's
one thing. They are going to bulid/farm/ranch it etc.

If you're trying to plan for the future and move assets to
"settle" your estate, letting them inherit the land "steps
up" the basis to the value at that point in time.

That is for example, if the land is worth $1M- -no one pays
gains tax on the increase. Might want to gift them
something else, BUT you also have to consider the estate tax
potential overall.

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