Are there any real estate lawyers here?
Are there any real estate lawyers here?
I have a question on gifting property and the effects of step up in basis.
11 Replies
Is this US, or Canada? No I am not a lawyer, but I am a RE investor (own RE in US and Canada) and speak to RE lawyers regularly.
ie. We do not have 1030 exchanges in Canada.
US based... i am fairly certain of the liabilities and the effects of a step up in basis, but i would like to know just how difficult the procedure is as it looks like it is something that can be done by the end user without the need for a RE Lawyer.
I know that step up in basis means re-evaluation in current market pricing, thusly eliminating any capital gains over the original acquisition pricing.
I know that step up in basis means re-evaluation in current market pricing, thusly eliminating any capital gains over the original acquisition pricing.
Only if you inherit it. If you're gifting it, or get gifted a property, you get carryover basis - the original basis. There is no re-evaluation at current market pricing for a gifted property in the USA.
Sorry can't help much.
probably another 5-10 questions need to be asked....
Is the person gifting the property related?
Is it their primary residence?
Do they own other property?
Is it coming from a company they own or personal gift?
Is it going to you personally or to a holding company you own?
Are you the sole beneficiary of the gift?
Is the property clear title?
Is there a mortgage on the property?
Is the property used as collateral for other loans?
Are there other medical/legal/competency issues with the gifter?
etc.
... In Canada, we have things like Bare Trusts for a single property owned by a parent wanting to be
transferred to the next generation in a tax efficient way, while maintaining the gifting parents rights while they are still alive.
Sorry can't help much.probably another 5-10 questions need to be asked.... Is the person gifting the property related? yesIs it their primary residence? the recipient, yes... the gifter, maybe yes maybe no.Do they own other property? yes Is it coming from a company they own or personal gift? personalIs it going to you personally or to a holding company you own? personAre you th
those are definitely relevant questions.
there is a preexisting living trust, but the idea is to gift the property now so that the recipient can do what they want with it... take out a loan, live in it, etc...
Is the trust irrevocable or revocable? I'm not sure it makes a difference, but it might. As far as I know, you don't get a stepped up basis.
I think we've just decided to make the transaction as a gift in real time... taxes be damned.
Is it their primary residence is the key question.
If they gift it to you or put it in an irrevocable living trust, You can kick them out(assuming you are the trustee!)
If you get married, You can also lose the property in a divorce.
Had a funny discussion on this exact topic yesterday. Real life example...
parents bought the kid a home,
Kid gets married,
gets divorced,
wife takes half the house. (not sure how long they were married, and if they had kids, but I would guess more than a few years and yes, had kids)
In a bare trust, they the beneficiary can direct you the trustee as to what to do and how to deal with the asset.
Ie, they live in the home and you cannot sell it while they still live there.
You cannot do anything against their wishes while they are alive, assuming they are mentally competent of course.
This is not legal advice, please consult your Lawyer for your state/province/Country.
