Quote:
Originally Posted by jiminnm
There is no such thing as mandatory gift taxes and none are automatically owed on the making of a gift unless one exceeds the amount of estate tax exclusion (currently about $12 million).
In this instance, a sale of a house to a relative for less than market value results in a gift for the amount under market. This year, the annual gift exclusion is $16,000 for a gift to any individual, so the amount in excess of $16K is the gift. That gift should be reported on a form 709. The donor has the option of paying a tax on that gift or reducing the donor's estate tax exclusion by the amount of the gift. Given the level of estate tax exclusion, there is no reason that any tax need be paid here. There is no reporting of gifts up to the annual gift exclusion amount.
Calculation of the tax basis of the home will begin at the actual sale amount, not market value.
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I'm not sure why you decided to quote me...and out of context. I only included that line because the OP seemed to be under the impression that he, as a recipient, could be liable to pay a gift tax. As we both pointed out, gifts which exceed the yearly exclusion amount can be covered under the lifetime exclusion which is currently $12.06 million. Provided that proper filings are made with the IRS, no gift tax or estate tax will be owed if the total involved is less than $12.06 million.
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