From Realtor Magazine Online, Daily Real Estate News July 6, 2009
With home prices low, now could be a good time for parents to give their children a home or even an investment property.
Here are some suggestions for managing the tax consequences from Mark Luscombe, tax analyst with Wolters Kluwer.
Give a cash gift.
Individuals are allowed to gift up to $13,000 per person in a given year without incurring gift tax. That means a couple could give their offspring and spouse $52,000 in a single year to go toward a down payment.
Lend money.
The government requires that family members meet or exceed minimum loan rates to avoid having the loan be considered a gift. The rates are currently low. One way to handle this is for parent to use the $52,000 gift exclusion to forgive both interest and principal.
Use a trust.
Set up a qualified personal residence trust, or QPRT. You’ll need an attorney to handle this transaction, but in a nutshell, parents put the home they want to give their children into a trust. At the end of a pre-set term, the home passes to the children with no taxes due.
Source: The Wall Street Journal, Shelly Banjo (06/25/2009)
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