Posted: 9/15/2013 5:33:00 PM EDT
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I'm in the beginning of doing a land transfer with my Dad to build a home on. He wants to gift me some acreage but I was curious about something.
Is he better to gift it or am I better to buy it for a $1/ac (for example)? He is going to see an attorney tomorrow about it, I was just curious. Thanks |
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Quoted:
It's probably better to purchase the land from him. He might be hit with something if he's giving out valuable gifts like that... Not sure though. Just seems like there would be a limit to something like that. Yeah I was reading something like that. Example he can gift 14,000 per person so the value could not exceed 28000 for my wife and I. Anything over that he has to file a gift tax return it also said he likely wouldn't be taxed due to a lifetime gift total of 2,000,000. I don't know if these figures are accurate for 2013 or if any of the info is right. It was on the Internet. |
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Currently, gift and estate tax is "unified" and the most you can give away (both during life and after death) without a gift/estate tax is $5.25 million (not counting the annual per donee exclusion of course). (For a married couple, that's $10.5 million but there are rules for giving by couples)
Currently, the annual per donee gift exclusion is $14,000. So, don't take my word for it, but if the land is owned by your dad and his wife, they could each gift $14,000 in value to both you and your wife each for a total of $56,000 a year, without filing gift tax returns. Disclaimer: not a lawyer, just giving you this information based on my textbook. Verify it yourself. Rely on it at your own peril. |
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Keep in mind that selling for $1 is the same thing as a gift - it's not a fair market price unless he'd sell it to anyone for that amount.
Talk to your lawyer and accountant to make sure the transfer is done correctly and without surprise tax problems down the road. |
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It's pretty much all been said, but I'd like to add that it depends on the value of the land, the cost of conveying, and the value (and nature) of your parents' entire estate.
When I say cost of conveying land I mean transfer taxes, recording fees, surveys, etc. While these costs aren't likely to compare to the income/gift/estate taxes, they can run into the thousands, and there are often exemptions for certain types of conveyances. Seeing a lawyer to advise him as how to handle it for his situation is the best idea. |