sethb[at]panix.com (Seth) wrote:
- quote -

Yes. And even though the gifts will be California community property,
I plan to have them file gift tax returns and elect gift splitting to
start the statute of limitations on each annual gift.

Stu

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In article <Xns9ABC6A1BDFA6Aavocatstuyahoofr[at]130.133.1.4> ,
Stuart Bronstein <spamtrap[at]lexregia.com> wrote:

- quote -

The amount they can give each year is a dollar amount; do they plan to
have the house re-appraised each year to calculate the actual gift
value?

Seth

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An issue came up that we've touched on, but I don't recall the
specifics and would appreciate your input.

When someone makes a loan but forgives one or more payments, the loan
is required to include interest. If the interest goes unpaid as
well, it seems to me that there are a couple of ways (at least) this
could could be treated:

1 - the recipient has cancellation of debt income for the interest,
or

2. The donor has income for interest he was entitled to but forewent.

How does the IRS treat this in practice? Do the parties have a
choice, or is there one way they require the transaction to proceed?

In this case parents want to lend children money for the downpayment
of a house, payable over nine or ten years (in part but not
completely to keep the gift under the gift tax exemption). They will
probably forgive the payments as they come due, though they reserve
the right not to do so.

If they sign the bank's "gift letter" saying the money was a gift
even though it was really documented as a loan (I know, I know, bank
fraud, but I'm looking at the tax implications) is that something the
IRS would look at to determine if the gift was all made all at once?

Final question - the parents are considering buying the property with
the kids, taking title 35%/65% (the down payment will be 35%). Then
they would make gifts of proportional interest in the house each year
until the kids own it outright. It seems to me that this would avoid
the imputed interest issue. Am I missing something? Are there other
considerations?

Thanks a lot for your thoughts.

Stu

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >