Una wrote:

- quote -

Not in this case. The basis of inherited property is increased to the
value at the donor's date of death. In this case he apparently died
nine years ago, so the increase in value over the last nine years would
be taxable capital gain.

- quote -

That happens sometimes. Money is thicker than blood.

Stu

Wouldn't any capital gains accrued before the estate settles be taxed in
the estate? Ie, not capital gains to any beneficiaries of the estate?

It sounds like the family is going to have to go to court, or allow the
executor (sister) to continue holding the estate hostage, extorting its
assets from the rest of the family.

Una

On Dec 9, 10:46 am, kalanamak <kalana...[at]qwest.net> wrote:

- quote -

If I am reading the original post correctly, the primary reason for
transferring the inheritance to the grown granddaughters was to pay
less in taxes. But will you really? We are talking capital gains, not
OIT. Do the granddaughters have so little income they qualify for the
5% rate? If so, how much of the gain will be at 5% and how much will
be bumped up to 15% (IOW, is it worth the trouble)?

- quote -

All the good adivce in the world is limited in usefulness if the other
party isn't playing by the same set of rules. Your account of the
executor's past actions suggest she doesn't care what is right and
wrong. If she's going to do what she wants anyway, what does it matter
what the law says? Unless your son is willing to get screwed in the
name of "keeping the peace", I would suggest he run immediately to a
lawyer.

If the mortgage involves below market interest, the foregone interest
counts as a gift. Whether or not there is gift tax depends on the total
amount of gift money.

Una

D. Stussy wrote:
- quote -

I don't think so. First of all if there were enough money to justify
worrying about the GST, they should spend the money to hire a tax
lawyer to figure it out.

But the GST deals with gifts. I was proposing that, if he didn't
qualify for a qualified disclaimer (which would implicate the GST) the
son should sell the property to his children, and forgive the loan
payments each year. If the father sells it to the children, taking
back a mortgage to be sure the transaction goes the way it is supposed
to, it shouldn't be considered a gift.

Stu

"Stuart Bronstein" <spamtrap[at]lexregia.com> wrote in message
news:Xns9A01961FD2A68avocatstuyahoofr[at]130.133.1.4...
- quote -

OK, but won't that raise a GST issue? (I don't deal with GST issues and
refer them out.)

kalanamak wrote:

- quote -

Actually there is. It's called a qualified disclaimer. It's
probably too late in your case, since it has to be done within nine
months of when the original beneficiary inherits the property. Even
if the property is still in the decedent's name nine years later,
that doesn't extend the time.

As a result, as someone else noted, the only other way to do it
without tax consequences is for the son to give an interest worth
$12,000 each year to his daughters. A yearly appraisal will be
required to do that. If the son is married, he and his wife can file
a gift tax return, elect to split the gift, and as a result give
double the amount, as it is treated as coming half from each spouse.

Or he could sell it to them now, and take back a note that called for
annual payments of $12,000 (each) or less. The one drawback to this
approach is that interest is required to be charged. So either the
son will have to recognize taxable income in the amount of interest
he could have but didn't receive, or the kids will have to recognize
the interest as cancellation of debt income.

- quote -

How about just using a mortgage?

Stu

kalanamak wrote:
- quote -

The property may actually still be in his name, but it technically
belongs to the Estate of (his name), and when sold will generate taxable
income to the estate.

At this point however, and in view of this added information regarding
possible family dissension, you need to engage an attorney versed in
estate matters.

ChEAr$,
Harlan Lunsford, EA n LA

Phil Marti wrote:
- quote -

Property owner died 9 years ago, but property still in his name.
Property has doubled in value. 50% of what is coming will have capital
gains.

Executor is sister, who has broken more than one state law about her
role as such. Some families are unwilling to go after a family member in
court. Sister now wants property all in her name (assessed value is
going up 24% for 2008) and wants to write IOUs (interest-free) for "five
to ten years down the line". We want our money now. The posturing has begun.

I file this under "inlaws".

On Dec 9, 2:41 am, kalanamak <kalana...[at]qwest.net> wrote:
- quote -

Inheritance is not taxable.

Inheritance has a stepped up basis to the time that it was
inherited... given that, where is the capital gain? Or at least, the
capital gain isn't that huge.

He can gift his grown daughters with $12,000 each annually without
gift tax, $24,000 if he is married.

"kalanamak" <kalanamak[at]qwest.net> wrote:

- quote -

The basic answer is "no," but I'm having trouble seeing the problem, either
with getting the money where he wants it or making sure Sisterwoman doesn't
stiff him (from the unquoted part).

Why is there concern about tax brackets? This is an inheritance, which is
not taxable income. Why is there concern about the sister's actions? Isn't
there an executor?

A little clearer explanation of the situation, including some dates might
help.
--
Phil Marti
Clarksburg, MD

kalanamak wrote:

- quote -

The son can gift his children $12,000/yr with no gift tax consequence,
or, he can use up part of his $1M lifetime unified credit. If he's
married, the $12K doubles to $24K.

The transaction is a gift the way you describe it.
JOE

Is there an IRS-accepted way to have money obtained from a sale of
property left in a will go directly to the granddaughters of the
(now-deceased) land owner. His will left a share to his son, who wants
it to go to his grown daughters, who are in a lower tax bracket.

Sister of son is buying out his share and putting the property in her
name. We don't want to disclaim his share, as it will then be split with
all the son's kids (not just grown daughters), and we don't trust sister
to pay up without a scuffle, and we don't want to turf that burden onto
the granddaughters.

What about a contract for deed, where an escrow agent holds a quit claim
deed from the son to his sister, but the agent mails the money directly
to the granddaughters?