Selling property??

Question

my father is selling property and he plans to split the $$ with my sister and i. he needs some of the $$ to pay of debt and he's going to give my sister and i what is left over. he lives in VA, i live in NC. what things do i need to consider w/taxes, ect? basically, how can i hang on to as much of the $$ as possible.

Answer 1

The new IRS rules, effective for tax year 2006 (this year), say you can give a gift to anyone tax-free up to $12,000. If you (or dad) are married, he and his wife can each give $12,000 to each of you and your spouse for a total of $48,000 tax-free from them to you and your spouse.

From the IRS website:

Gift Tax

The gift tax applies to the transfer by gift of any property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced interest loan, you may be making a gift.

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.

* Gifts that are not more than the annual exclusion for the calendar year.
* Tuition or medical expenses you pay for someone (the educational and medical exclusions).
* Gifts to your spouse.
* Gifts to a political organization for its use.
* Gifts to qualified charities (a deduction is available for these amounts).

Annual Exclusion

A separate annual exclusion applies to each person to whom you make a gift. For 2002, 2003, 2004 and 2005, the annual exclusion is $11,000. Therefore, you generally can give up to $11,000 each to any number of people in 2002, 2003, 2004 and 2005, and $12,000 in 2006 and none of the gifts will be taxable.

If you are married, both you and your spouse can separately give up to $11,000 to the same person in 2002, 2003, 2004 or 2005 ($12,000 in 2006) without making a taxable gift. If one of you gives more than $11,000/$12,000 to a person in any one of these years, refer to gift splitting in Publication 950, Introduction to Estate and Gift Taxes.

Gifts to individuals are not deductible on the donor's income tax returns.

Answer 2

If the amount is under 10K, there is no gift tax. If it's over that, I would recommend that he gives you a gift of 10K for Christmas then up to 10K for New Years.

He can also put in in a trust that you can draw from.