It’s not uncommon for family to gift real estate. As of late, the IRS is cracking down on how it’s done. Estimates show between 60% and 90% of transactions which appear to be gifts of property to family members may go unreported. Complicating matters further, this year Congress decided a person can give up to $5 million in one’s lifetime without having to pay gift tax. Even if no taxes were due at the time of transfer, the transaction could reduce a lifetime gift-tax credit for the taxpayer. In other words, more gift or estate tax could be due later in life.
Currently, the IRS is soliciting states to disclose information on gift-like transactions as they ferret out property owners who will be cited for failing to report. The numbers of those transactions are surprisingly high; noncompliance rates of 60% in Connecticut, 90% in Florida, 60% Nebraska, 100% in Ohio, 90% in Virginia, 80% in Washington and 50% in Wisconsin have been indicated.
The rule is: If the property is valued at more than $13,000, a gift-tax return must be filed. Experts suggest even if you failed to report the gift initially, it is still better to do so late rather than have the IRS discover it in an audit. Should you or someone you know have received real estate gifts, check with your accountant to see what, if anything, you need to do to avoid an unexpected, and likely unpleasant, phone call from the IRS.
Posted: June 8th, 2011 by Just Real Seattle
