This will be a very brief informational article on how real estate may be treated when receiving a gift of real estate from a family member, relative, friend as well as through divorce or death.
However, you must seek licensed and professional assistance when trying to determine if any taxes might be owed due to the transfer of property to another individual or any other entity.
By making inquiries, it will surely keep you out of trouble and not receiving any surprises later on from the IRS that you owe taxes on acquired property.
Some people today get a home through a family member, relative or non-married individual as a gift and you need to know the tax consequences, if any for that gift.
However, it can get very complicated due to how it is setup in a trust or other fashion.
I am not licensed to provide any type of guidance or make a decision as to the law, so you would need to consult a tax attorney or your CPA to determine how your individual situation should be handled.
Here are some links that you can go to and be able to ascertain information that will be helpful, even before you speak to a professional about your specific needs and wants.
https://www.elderlawanswers.com/giving-your-home-to-your-children-can-have-tax-consequences-9667
https://homeguides.sfgate.com/quitclaim-deed-vs-gift-deed-1494.html
https://www.nolo.com/legal-encyclopedia/free-books/living-together-book/chapter6-7.html
In a divorce situation, which can be and a much more complicated situation, 41 states are equitable distribution states and this is where the courts step in and make the reasonable call as to what is fair, reasonable and an equal distribution of assets, including real estate.
Nine states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin (Alaska also allows a full or partial community property election), are considered community property states, whereby husband and wife own their property together through a State statute.
There are exceptions to the rule, so you must know this and the differences by reading and most important, asking your CPA and/or Lawyer. You cannot hide anything in a divorce situation, so full disclosure is necessary on all assets, especially property. The following are link which will delve more into the subject matter:
https://www.journalofaccountancy.com/issues/2013/apr/20126248.html
When a husband or wife pass away in a marriage, everything that was jointly owned passes through tax free based on the unlimited marital deduction. (including real estate).
There could be exceptions, based on whether other family members had partial ownership. Again, ask your CPA or attorney for advice.
When you sell your primary residence you are allowed a $250,000 exemption from profit if single and $500,000 (plus your original purchase price plus any documented capital improvements) if married (exceptions will apply, when one spouse dies depending on the time of the sale) The following is a link that will provide a greater in depth explanation and information about the subject matter: https://store.msuextension.org/publications/FamilyFinancialManagement/MT199104HR.pdf
Lastly, there is a tax of 3.8 percent tax on some (but not all) income from interest, dividends, rents (less expenses) and capital gains (less capital losses) that was passed by Congress in 2010, but became effective Jan. 1, 2013 on those individuals with adjusted gross incomes above $200,000 and couples whose AGI was above $250,000.
Again, this could affect those that maybe gifted or left in an estate rental properties that might affect the income taxes that singles or couples pay based on their income.
The following is another link that explains further, with examples of rental income and their potential ramifications on taxes owed:
https://www.realtor.org/small_business_health_coverage.nsf/docfiles/government_affairs_invest_inc_tax_broch.pdf/$FILE/government_affairs_invest_inc_tax_broch.pdf
Philip A. Raices is the owner of Turn Key Real Estate in Great Neck. He can be reached by email: Phil@TurnKeyRealEstate.Com or by Cell, (516) 647-4289 to answer any of your questions. To search for property, see what your home is worth or homes that have sold in your area, go to: WWW.Li-RealEstate.Com
