Gifting House Value

Parker loaned his son $10,000 to buy a house. When he loaned the money to his son, he put the house in his name to protect himself. His son paid him off, and he isn't sure how to sign the house over to his son.

QUESTION: Parker in Illinois loaned his son $10,000 to buy a house. When he loaned the money to his son, he put the house in his name to protect himself. His son paid him off, and he isn’t sure how to sign the house over to his son now. The home is worth about three times what he paid for it now. What would Dave do with it?

ANSWER: No, this is not like a car because the problem is you get into gift tax. If you give someone more than $13,000 in a year, you can get into a 55% tax on anything in excess of that. You’re probably going to have to sit down with a tax person—maybe a good estate attorney—and figure it out.

I would suggest your wife give your son $13,000 of the house, and you give him $13,000 of the house in value as a gift. You clearly define that with documentation, and then you can sign a quitclaim deed and just deed it over to him. You shouldn’t have any taxes. You need to see a CPA or somebody who does taxes to be sure that what I’m describing will work. You’re allowed to give individual-to-individual $13,000 a year and have no gift tax on it. There wouldn’t be any income tax implication either. If we could declare the value of the house to be $26,000, then we can pull this off in one year. It might actually be $14,000 this year. You need to check with a good tax person.

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