Posted by Dave Murray, Ohio CPA on September 02, 2003 at 14:14:03:
- Your parents will have to file a gift tax return. Whether they will owe gift tax or not depends if they have done other gifts which have used up their credit (called “unified credit”).
- The children will have the same basis as the parents and thus will pay capital gains tax since it is none of the children’s personal residence. There is obviously some planning that can be done to minimize the overall tax impact. I suggest you engage a competent professional to discuss this. Their fee will be much less than the potential tax if you mess it up…