Expert: Dick Dennis - 8/12/2006

Question
Hi Dick,
Me and my husband are selling one of our investment properties and would like to give my mom 115,000.  Can we give it to her as a gift of equity?(we don't want to pay tax on it) If yes, is this something our lawyer can do at closing? Also, what's the max gift of equity we can give in a life time?  We have 2 small children and want to make sure we will be able to help them out financially later on in life by giving them gift of equities.  Thank you and look forward to your answer.

Answer
Each of you may give $12,000 per person, per year, tax free up to one million total lifetime. The IRS doesn't care if it's cash or equities or valuable marbles. The taxable event happens at the time of the sale. Period. The IRS doesn't care if YOU get cash or candy bars. The amount of tax depends on your tax bracket and how much of a capital gain you have at the time of sale.

If you don't want to pay capital gains tax, then you should do a 1031 tax-deferred exchange with the property for another one that costs as much or more, and has a mortgage that is the same or more.

I recommend you consult with your tax expert to check into a by-pass trust that will help you diminish the amount of tax you owe the IRS. If you have investment properties, you should have had a tax attorney or CPA with whom you have been consulting. Well, do it again before you sell the property.

I do wish you well.

Dick Dennis              dixiedee13@aol.com