Gift tax, how does that work in Calif? My parent's wanna give me the house that is paid off already.?
Do I need to get the house appraised for the gift tax to work? I've talked to CPA, he said yes, need to get the house appraised so that he can put in an amount of the gift. When I've talked to a couple of Escrow Co, they said no need for an appraiser. I don't know what to do...Help plz if you know. Thanks!
- garyg7Lv 71 decade agoFavorite Answer
Did you ask the CPA to server as an escrow agent? You could then get a dentist to do the title search and have a doctor write your will.
You don't need to get an appraisal done. Your parents do. The purpose of the appraisal is to set the value that your parents will have to use on their gift tax return. There is a lifetime exemption of $1 million for gift tax purposes so unless the house is worth more than $2 million or your parents have already used some of their exemptions, they won't owe gift taxes.
Your cost basis will be your parents' cost basis. If they paid $50,000 for the house years ago and put in $25,000 in upgrades such as a new kitchen, a pool, etc. then your cost basis would be $75,000 even if the house is worth $500,000 now.
There are more efficient ways for your parents to let you have the house. You could get it appraised and buy it from them. They could "loan" the money to you and forgive a combined $26,000 in interest and loan principal each year. The loan could be structured in a way that would allow them to charge you a very low rate of interest. (The loan can be amortized over the usual 30 years, but if the loan papers say that they can demand full payment within a much shorter period they could set the interest to the current Applicable Federal Rate (AFR) which is currently as low as 0.44%.
I hope this helps.
GarySource(s): AFR: http://www.irs.gov/app/picklist/list/federalRates....
- ObamavengerLv 71 decade ago
There is no need for a formal appraisal but gift tax returns reporting the fair market value will have to be filed by each of your parents and the value they state can be called into question. Have you asked why they want to give it to you now? It might be better to inherit it. That is a question for an attorney who does estate planning.
- ?Lv 71 decade ago
Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return.
What can be excluded from gifts?
The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.
1.Qualified Gifts using the above IRS rules that are not more than the annual exclusion amount of13000 1 individual to any other number of individuals for the calendar year 2010.
The person who receives your gift does not have to report the gift to the IRS or pay gift or income tax on its value.
If you give any one person gifts in 2009 or 2010 that were valued at more than $13,000, you must report the total gifts to the Internal Revenue Service and may have to pay tax on the gifts each year.
For more information go to the IRS.gov web site and use the search box for publication 950, Introduction to Estate and Gift Taxes, IRS Form 709 United States Gift Tax Return, and Instruction for Form 709.
The instructions are available at the IRS.gov web site choose within Forms and Publications
However, what you call a gift and what the IRS defines as one may be different.
- cainvest1Lv 71 decade ago
Your CPA is correct. Your parents need an appraisal to confirm the amount of the gift so they can pay the tax. You need to appraisal to confirm your cost basis when (if) you decide to sell.
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- 1 decade ago
Dear SW: You do not need an appraisal. Your basis is the donor basis plus any gift tax paid.
This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more. Errol Quinn Enrolled AgentSource(s): IRS Pub 551
- troLv 71 decade ago
your parents will pay the tax on the gift in excess of the limit