Tax Law (Questions About Taxes)/Real estate gifts

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Question
Hello!
I inherited a beach house from my parents 5 years ago. My sisters and I formed an LLC to manage this property and have had a full time tenant for the past 5 years.  My younger sister and I have children starting college next September and we would like to gift our share of the beach house to our third sister so that we would not have to report the house on our financial aid forms.  The house has been operating at a loss since we inherited it and we have all three split the loss on our tax forms.
My third sister is fine with being gifted our shares in this property but we are all concerned about what the tax implications would be for our third sister.  We have agreed that in 8 years when all of our children are out of college, our third sister would regift our shares back to us.
Our accountant assures me that this is completely legit.  Could you tell me what you think of this idea.  Thank you!

Answer
Donna,

Thanks for your question.

I would find another accountant.  When a gift is given, it must be without any strings. Your agreement for her to gift it back to you in eight years renders the original gift void.

If she is the sole owner, the tax implications for her are simply that she would bear the entire loss (which may or may not be deductible) and would pay tax on any gain.  If any of the losses realized thus far have been suspended losses (not deductible due to the passive loss limitations), those losses would be added to her basis when the gift is made.

Hope this helps.

John Stancil, CPA  

Tax Law (Questions About Taxes)

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John Stancil, CPA

Expertise

I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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