Q: I bought a second home to fix up and sell. I paid $46,000 and put $30,000 into it. Then, I decided not to sell the home but to rent it instead to my daughter and son-in-law. The house is worth $150,000 and I’m thinking of either selling or gifting it to them. For tax purposes which is the best way to do this?
A: The best thing to do is to give them the house to them over time. You can gift each of them $13,000 per year, or $26,000 per year total. You put $76,000 into the property, so that’s roughly one-third of the value per year that you’d be giving them. If you have to give it to them at the current market value, you can give them one-sixth of the value each year for six years.
This way, you and they avoid gift taxes or creating a taxable event. Be sure to have a knowledgeable estate attorney or real estate attorney draft up the paperwork so you do it correctly and don’t run afoul of IRS regulations.
Jan. 19, 2009.
(1 votes, average: 5.00 out of 5)
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