I have a townhouse want to give to my son. How can I do this legally?

Question

Will I suffer any tax consequences or capital gins on my part? i just want to let him have it.

Answer 1

Just call an attorney and ask him/her for advice and that way you will know for sure what to do legally.
Depending on what state you live in I don't foresee any problems at all but to be on the safe side call for legal advice.
Seeing as it's your son that should make a great difference to the good for both of you.
I hope your son appreciates the wonderful thing you are going to do for him, the lucky kid.
You must truly love him and I hope all goes well for both of you as I believe it will.

Answer 2

This is really, really complicated and you really need to consulte an estate attorney and not rely on answers. The money you spend on a good one will potentially save you thousands.

One way is that you are able to gift something like $11,000 per year to a person and not pay taxes. So $22,000 if he is married and say $44,000 if he has two children. You get an appraisel and have a new deed drawn up giving him the percentage to that amount. You do this every year until he owns all of it or just close.

If he moves in and even after a couple of years you just gift the rest he will get a tax break for his portion as you get up to $250,000 tax free or 500,000 if he is married. If you have lived in this house for 2 out of the 5 you could take the tax break and sell it to him. You could gift him the money for the mortgage if you have the resources.

Then there are trusts. Commonly in a "living trust" you retain ownwership of the house and it revertes to him upon your death, thus saving on taxes.

Or you could sell it to someone (take the tax break yourself) else and cosign the loan and gift him money for a new place. Like I said it is very complicated and any of these or a combination of them will work. This is best done while taking into consideration your entire estate.

Again talk to a COUPLE of lawyers, not just one. You and your son will save tens of thousands. I understand just wanting to give it to him but there is no use in throwing away hard earned money.

Answer 3

You won't have any captial gains, but you may well trigger a Gift Tax event. Generally you can give up to $12,000 per year per without tax consequences. Beyond that you can use your lifetime exclusion but that comes off the value of your estate when you die so you should think hard about that if your estate is significant.

Your son's basis in the property will be whatever your basis was in the property.

You would be better off leaving it to him in your will. The total estate tax picture will be the same, but you'll avoid the Gift Tax and he'll get the stepped up basis when you die.

Answer 4

Need to correct an answer:

2. When he eventually sells it, his cost basis (for capital gains purposes) will be your cost basis, plus improvements, etc. If you are elderly, and instead leave it to him in your will, his cost basis will be the townhouse's FAIR MARKET VALUE at your date of death.

As other posters have said, if you gift him the real estate, he steps into your shoes for gain or loss purposes. Your basis in the unit carryovers to him. On the other hand if he acquires the unit through a bequest, he gets a step up in basis equal to the unit's FMV on the date of your death.

I agree with the idea of seeing a professional. As others have suggested there are other alternatives, such as loans, that may get you to the same place.

Answer 5

It would not affect your income tax return, but there are other issues.
1. Any gifts to an individual in excess of $12,000 in a year must be reported on a gift tax return. You probably won't owe any tax on it at this time.
2. When he eventually sells it, his cost basis (for capital gains purposes) will be your cost basis, plus improvements, etc. If you are elderly, and instead leave it to him in your will, his cost basis will be the cost basis at your date of death.
3. If you want to "give" it to him to get the value of it out of your estate, but want to still live in it, get professional advice first. Many seniors make a big mistake when doing something like this.