Gifted property

dubau2 · #1 (**permalink**) 09-30-2017, 11:43 AM

Hello all me and my wife will be receiving a gifted property from her Great Aunt and uncle. From my research I have found that they can gift up to 14k per year to each of us totaling 56k for one year since the property is held jointly. My question is they have had the property as a rental for over 27.5 years so it is fully depreciated. That being said I have researched the tax basis and all that as well stating that if the basis is below market value their basis will become our basis. I'm basically trying to find out how it will impact us on taxes and if they will be impacted with taxes. I'm not sure if they would have to pay recapture taxes or any of that other stuff. Now I would assume that since its fully depreciated when we sell the property we would pay the recapture taxes and capital gains. I'm just getting into the rental business myself so all of this is very new to me.

Wnhough · #2 (**permalink**) 10-01-2017, 12:09 AM

Quote:

Originally Posted by dubau2

#1;Hello all me and my wife will be receiving a gifted property from her Great Aunt and uncle. From my research I have found that they can gift up to 14k per year to each of us totaling 56k for one year since the property is held jointly.

#2My question is they have had the property as a rental for over 27.5 years so it is fully depreciated. That being said I have researched the tax basis and all that as well stating that if the basis is below market value their basis will become our basis. I'm basically trying to find out how it will impact us on taxes and if they will be impacted with taxes. I'm not sure if they would have to pay recapture taxes or any of that other stuff. Now I would assume that since its fully depreciated when we sell the property we would pay the recapture taxes and capital gains. I'm just getting into the rental business myself so all of this is very new to me.

#1; cORRECT;Gift splitting allows a couple to increase their total gift tax exemption amount by combining individual allowances.For gift splitting to be official, both spouses must agree to the gift and specify the situation when filing taxes. In 2017, the gift tax exemption was set at $14k per individual gift annually. Gift splitting allows a couple to donate a total of $28k before being taxed on the contribution.

#2The rules as to basis in the case of a gift do not allow for a stepped-up calculation and they depend upon whether the basis is being calculated for purposes of gain or loss.If you sell the asset, your basis is generally the same as the donor's adjusted basis (plus any gift tax paid). However if the basis is greater than the fair market value at the time of the gift, then, for purposes of determining loss, the basis is equal to the fair market value at the time of the gift.

dubau2 · #3 (**permalink**) 10-02-2017, 11:43 PM

Ok thanks for clearing that part up for me! Now would their be any tax implications for them. say for instance the property was valued at 50k they wouldnt pay any gift tax since its below the 56k max but would they have to pay any recapture tax after the transfer of the property like you would in a sale of a depreciated property?

dubau2 · #4 (**permalink**) 10-02-2017, 11:47 PM

Ok thank you for clearing that up for me. So would there be any tax implications for them gifting us the property. Would they have to pay "recapture" taxes on the property since it is being transferred? say for instance the property was 50k since they can gift us up to 56k they wouldnt pay any gift tax are there any other taxes that they should be concerned about for the tax year?

dubau2 · #5 (**permalink**) 10-02-2017, 11:49 PM

Ok So they would have any recapture taxes or anything like that they would have to pay for the transfer of the property right?

Wnhough · #6 (**permalink**) 10-03-2017, 05:05 AM

Quote:

Originally Posted by dubau2

Ok So they would have any recapture taxes or anything like that they would have to pay for the transfer of the property right?

No I don ot think so you as a recipient, need to pay sec 1245 recapture tax on the unrecpatured depreciator; Not on their gift tax return 709 but it will be reported when you dispose of th epty in the future