Posted by Rick V on April 18, 2000 at 11:46:21:
Huh? Your question does not make sense. You never pay income tax on an inheritance. You pay income tax on income, and you pay inheritance or estate tax on an inheritance.
And if the property was sold by the father, there wouldn’t be a property to inherit.
Please restate your question.
Taxes on Real Estate Deal - Posted by Ed Bowen
Posted by Ed Bowen on April 17, 2000 at 12:33:47:
My wife and I own a rental investment condo unit. It’s market value is around $125,000 and it’s basis is approx $44,000. We would like to give this property to our son as his principal residence. Based on the numbers we have between $70,000 and $80,000 of taxable capital gain on the property. How would this capital gain be treated taxwise? Would we still be required to pay the capital gains tax on this transaction?
1031 Starker Delayed Real Estate Exhange - Posted by PatrickMD
Posted by PatrickMD on April 17, 2000 at 23:46:58:
Dear Ed, An addendum to Rick’s; Then, if and when your son wants to sell, he should move out and rent it for a time before he sells as an income generating property . Ask your accountant to check into the 1031 Starker Delayed Real Estate Exhange. (You can find good descriptions and the professional intermediaries you’ll need by searching on the web under 1031 Real Estate Exchange yourself.) It’s an IRS-approved way to differ income generating RE taxes indefinately. It’s the ONLY way to fly!
Re: Taxes on Real Estate Deal - Posted by Rick V
Posted by Rick V on April 17, 2000 at 13:22:32:
No capital gains taxes are due, because no income taxes are due on a gift. However, if you give it outright all at once, you will use up some of your unified credit for gift & estate tax purposes. Your wife and you can each give $10,000 a year to each donee without using up any of your unified credit.
What you should do is each give $10,000 (approximately 1/4th of the property) to you son each year. In approximately 4 years, you will have given it all away, gift and income tax free.
The best part of this is if your son lives in it as his pricipal residence for at least 2 years after he has received the whole property, he can sell it tax-free.
Re: 1031 Starker Delayed Real Estate Exhange - Posted by Rick V
Posted by Rick V on April 18, 2000 at 10:02:45:
If his son lives there for at least 2 years after acquiring full ownership, there is no need to do a 1031 exchange. It is all tax-free to him. Why defer taxes under a 1031 when he can have it TAX-FREE if he sells it as his personal residence?
Re: 1031 Starker Delayed Real Estate Exhange - Posted by PatrickMD
Posted by PatrickMD on April 18, 2000 at 11:27:43:
I’m sorry, I’m a little new at this. Would the son’s children have to pay an inheritance on the income from the sale if it is willed to them, even if it was tax free to their father?