Capital Gains and Gift Taxes

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    Capital Gains and Gift Taxes

    Grandparents gift condominium to son, with fair market value of $290000, cost of $200000, Mortgage balance of $125000.  Son assumes the mortgage.  Have grandparents made a gift of $90000 (290000-200000)?

    Son desires to sell condo to his daughter, for the amount of the mortgage, $125000.  Does son have taxable capital gain of $90000, and has he made a gift of $165000 (290000-125000) to daughter?

    What is daughter's cost basis?  And is what is the preferred way to transfer the condo to the daughter?

     
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    Re: Capital Gains and Gift Taxes

    In response to bodo71's comment:

    Grandparents gift condominium to son, with fair market value of $290000, cost of $200000, Mortgage balance of $125000.  Son assumes the mortgage.  Have grandparents made a gift of $90000 (290000-200000)?

    Son desires to sell condo to his daughter, for the amount of the mortgage, $125000.  Does son have taxable capital gain of $90000, and has he made a gift of $165000 (290000-125000) to daughter?

    What is daughter's cost basis?  And is what is the preferred way to transfer the condo to the daughter?

    Dear bodo71:

    The gift to the son is the full value, minus the debt assumed, or $165,000.  The Grandparents have a sale for the debt assumed of $ 125,000 (no loss allowed).

    The son has a basis equal to the larger of the debt assumed of $ 125,000 or the basis in the hands of the grandparents.  The transfer to the son's daughter has the same character and consequence as the transfer from the grandparents to the son.

    The basis to the daughter is the same as the basis to the son.  The preferred way to transfer the condo to the daughter is beyond the scope of this service, as other factors and facrs would need to be explored and discussed to make that determination.

    Hope this helps in preparing your returns!

    Mark H. Misselbeck, C.P.A., M.S.T., Tax Principal

    Katz, Nannis + Solomon, P.C.

     

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