Gift Of Equity And Tax Implications
the situation, My wife and I will be buying my grandmothers house and we are trying to work out a gift of equiity to help us with the downpayment and/or closing costs.
I see that if a gift is given in an amount under $11,000 in any tax year nothing has to be done.
well what happens if a gift of $29,000 is given to my wife an I in the form of equity. is the $18,000 over the $11,000 limit taxable and if so at what rate. and who actually pays the tax the doner or the donee ??
are My wife and I considered one person, and only allowed $11,000 gift to avoid taxes, or are we two people and can recieve a $22,000 gift without penalty. from my grandmother ??
is it possible to use "unified credit," to
reduce/elimnate any taxes due.
also, being that this is my grandmother and I am of linear relation, my mother is still living, would I be considered a skip generation in this case ?? pertaining to generation skip tax
thanks in advance for the help
[ Edited by Dennis001 on Date 01/07/2004 ]
Any person can give a gift of $11,000 per year to any other person.
Your grandmother can give you and your wife $11,000 each. If your grandfather is alive he can as well.
I'm assuming the $29,000 is a necessary number, or the purchase price could be lowered to reflect this.
What about her taking back a note for the other $7,000 that she gifts to you next year?
""What about her taking back a note for the other $7,000 that she gifts to you next year?""
could you elaborate on this ??
Quote:... what happens if a gift of $29,000 is given to my wife an I in the form of equity. is the $18,000 over the $11,000 limit taxable and if so at what rate. and who actually pays the tax the doner or the donee ?? Your grandmother can give $11K per year each to you and to your wife for a combined tax free gift of $22K.
Quote:...is it possible to use "unified credit," to
reduce/elimnate any taxes dueIf the gift is actually $29K, then the extra $7K is reported on a Gift Tax Return filed by your grandmother. Any gift taxes due are paid by the giver not by the recipient. Normally, a donor does not owe any gift tax until the total amount of the donor's taxable lifetime gifts exceed $1 million (in 2003). Until then, the donor's federal estate tax unified credit is reduced by the amount of the taxable gift.
Quote:... also, being that this is my grandmother and I am of linear relation, my mother is still living, would I be considered a skip generation in this case ?? pertaining to generation skip taxYour grandmother would report on Form 709 the GST tax imposed on inter vivos direct skips. An inter vivos direct skip is a transfer made during the donor's lifetime that is: (a) subject to the gift tax;
(b) of an interest in property; and
(c) made to a skip person.
A transfer is subject to the gift tax if it is required to be reported on Schedule A of Form 709 (this amount would be $7K in your example).
You can find more details in the instructions for completing the Gift Tax Return, Form 709.
I thank you all for your help and input on this subject, it looks to me as my questions have been answered.
This is great because in a way I'll be able to assume 20% equity in the home which I am purchasing. which in the long run helps me out big time. and it's no skin of anyones back.