Tax Law (Questions About Taxes)/Gift/Estate Taxes

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Question
My brother has two small parcels that he plans to either give or pass on to his son.

It appears that if he gives the land prior to his death there will be gift tax to consider. If he passes on and provides for the gift as part of his estate (under $500 thousand total) there will be no gift or estate taxes to consider.

Does that sound true?

Thanks.

Answer
Ray,

Thanks for your question. No, that is not correct.

There are two exclusions available from the gift tax.  First is an annual exclusion of $14,000.  If the fair market value of the gift is not more than $14,000 no gift tax is due and no return must be filed.  If he is married, he can elect gift splitting and he and his wife each will be attributed up to $14,000 each. If the sons are married, they can be treated as giving a gift to the spouse, for a total exemption of $56,000 per son. If you elect gift splitting, a return (Form 709) must be filed but no tax would be due.

Second is the lifetime exemption.  There is a lifetime exemption from gift and estate tax of $5,430,000 for 2015. Any gift in excess of the annual exclusion would reduce the lifetime exclusion. A Form 709 must be filed. The amount of exclusion used for gift tax purposes will reduce the amount of estate tax exclusion available upon his death.

Another factor is basis.  If he gives the land to them, their basis will be a transferred basis from him. That is, whatever his cost was becomes their basis for determining gain or loss when they sell.  If the land is inherited, their basis will be the fair market value as of date of death.

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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