house put in life estate

Forum|Forum|3 years ago
April 13, 2023
4 replies
22 views

does the owner of a house have to file a gift tax return for home going into life estate this year. THE Fair MARKET VALUE IS $225000.00 and cost basis $175000.00.They will not owe any gift tax but i still think they have to file.

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Best answer by BobKamman

Yes, a gift tax return is required, although it's unlikely any tax will be owed and the donors won't get arrested if they forget to file. Since it's not a gift of a present interest, there is no exclusion. Value of gift is based on FMV.

N

Norman2001

Level 6

It depends on the type of life estate. If it's an enhanced life estate a.k.a Lady Bird Deed, no gift tax return requirement.

Skylane

Intuit Community Champion

No need to record the transfer on a 1040.

it’s used most commonly by a parent transferring or gifting property to a child but allows the parent to retain the rights and benefits (i.e. state homestead benefits, etc.) in the property.
The deed is transferred with a clause giving the transferor ‘life estate’ or more practically, life tenancy in the property.
it avoids probate, has some benefit in Medicaid planning and can avoid some trusts.

If at first you don’t succeed…..find a workaround

sjrcpa

Level 15

I think Fred is asking about gift tax reporting.

The more I know the more I don’t know.

BobKammanAnswer

Level 15

Yes, a gift tax return is required, although it's unlikely any tax will be owed and the donors won't get arrested if they forget to file. Since it's not a gift of a present interest, there is no exclusion. Value of gift is based on FMV.

qbteachmt

Level 15

Does your State offer Transfer on Death deeds? It's easy to do. No gift or tax considerations.

Don't yell at us; we're volunteers

BobKamman

Level 15

My next best-seller is "How To Avoid Beneficiary Deeds." Actually, they're useful in some circumstances, where there is only one beneficiary or maybe two. The first problem is that they are public record, so you're telling the world your estate plan. The world might not care, but your beneficiary's creditors will be watching for your death. Second problem is that contingent beneficiaries are difficult to include and describe. "In equal shares to my four children, but if Adam dies it goes to his wife, and if Bill dies it goes to his three kids, except the one who is in prison."

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