Adding son to real property title gift tax question

Probably, but probably not without having to file a gift tax return. See Form 709.

Now to answer the question you didn't ask. Yes, this is probably a horrible idea. From the son's side it's usually better from a tax perspective to inherit property rather than receive it as a gift.

DIY estate planning, which is where this scheme usually pops up, is not a good idea.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

"Phil Marti" wrote in message news: snipped-for-privacy@q13g2000vbd.googlegroups.com... On Oct 26, 9:12 pm, awp west wrote: Now to answer the question you didn't ask. Yes, this is probably a horrible idea.

The first question to answer is, what is your purpose? There are more than one way to add a child to real property, but each has its pitfalls.

If you simply add a child as a joint tenant to your property, no gift tax is incurred at that time, and no gift tax is required to be paid. However when the parent dies the entire value of the property at that time will be included in the parent's estate tax return, not just the parent's portion. On the up side the entire value will get a stepped up basis to the value at the date of the parent's death.

Another approach is to add the child gradually. You can deed the child a proportion of value of the property each year up to the annual exemption amount. For example if the property is worth $130,000 this year, you can deed him 10% of the value. Then next year you can have the property appraised, and deed him the percentage appropriate for that value, until he owns the amount you'd like him to.

And a third approach is for you to sell the child either half of all (or some other proportion) of your property. You must charge market value for what he gets, and charge at least the minimum interest rate allowed by the IRS (which is fairly low these days, so that's in your favor). To the extent the payments are less than the annual exemption amount, you can forgive them without incurring gift tax. However for interest payments that are forgiven, one of you must generally pay income tax on those amounts.

There are probably other approaches, but I can't think of them at the moment.

___ Stu

This sounds like a good idea if you both could take advantage of section 121 (to exclude 250k of capital gain). However, you must sell the house at FMV. Also, in my opinion there should be an open bidding contract -- ie. the house should be put on the market for all to look at and the highest bidder wins -- because no-bid contracts screw taxpayers and there's always the feeling that there was corruption such as selling below or above FMV, etc.

I don't see why having a formal appraisal shouldn't be sufficient.

But again, as explained elsewhere, this is often not the best idea. You should talk to your accountant and estate planning attorney (getting them together at the same meeting would be a good idea) about whether this would be in your interest.

___ Stu