What if your child is not in a financial position to afford your house at full price? Unfortunately, this is not an advantageous situation for you as a parent.
If you sell your house to a perfect stranger for less than its FMV, then you can take a loss. It was a bad sale, but the IRS doesn’t care because it’s an arms-length deal.
But if you try to sell your house to a relative, aka your child, for less than its FMV, the IRS considers this a gift, and won’t simply let you take a loss on the sale. This is a related-party sale, and you will either have to use your Annual Gift-Tax Exclusion and a large amount of your Estate Tax Exemption to offset the sale, or pay gift taxes if you choose not to whittle away your exemption.
Your child’s basis in the house is also lower—the lower sale price will become their basis for any future sales and could result in higher capital gains taxes down the road.
Example: Say you want to sell your house to your child for $1. You think it’s a smart deal, but really, it puts everyone at a disadvantage. According to Gross, “If the FMV of your house is $500,000, and you sell your house for $1, you are essentially giving your child a $499,999 gift.”
You can exclude from taxes up to $30,000 of this gift (if you’re married) under the Gift-Tax Exclusion. This leaves $469,000 that you now either have to pay gift tax on or must exclude from your Estate Tax Exemption of $11.18 million.
As we mentioned earlier, your Estate Tax Exemption can probably take a one-time hit since it is so high this year. But keep doing this with the next house, and the next, you’re going to have no Exemption left to exclude your final estate when you really need it. Remember, as of now, the $11.18 million is only until 2025.
What if your child is not in a financial position to afford your house at full price? Unfortunately, this is not an advantageous situation for you as a parent.
If you sell your house to a perfect stranger for less than its FMV, then you can take a loss. It was a bad sale, but the IRS doesn’t care because it’s an arms-length deal.
But if you try to sell your house to a relative, aka your child, for less than its FMV, the IRS considers this a gift, and won’t simply let you take a loss on the sale. This is a related-party sale, and you will either have to use your Annual Gift-Tax Exclusion and a large amount of your Estate Tax Exemption to offset the sale, or pay gift taxes if you choose not to whittle away your exemption.
Your child’s basis in the house is also lower—the lower sale price will become their basis for any future sales and could result in higher capital gains taxes down the road.
Example:
Say you want to sell your house to your child for $1. You think it’s a smart deal, but really, it puts everyone at a disadvantage. According to Gross, “If the FMV of your house is $500,000, and you sell your house for $1, you are essentially giving your child a $499,999 gift.”
You can exclude from taxes up to $30,000 of this gift (if you’re married) under the Gift-Tax Exclusion. This leaves $469,000 that you now either have to pay gift tax on or must exclude from your Estate Tax Exemption of $11.18 million.
As we mentioned earlier, your Estate Tax Exemption can probably take a one-time hit since it is so high this year. But keep doing this with the next house, and the next, you’re going to have no Exemption left to exclude your final estate when you really need it. Remember, as of now, the $11.18 million is only until 2025.
办个基金，捐出去对回报社会
一离婚，全泡汤。老中都精得很。哈哈
不知道为什么要把财产给小孩。他们不都是有自己的生活吗。