No Gift Tax

By Edith Lank

October 23, 2016 5 min read

Dear Edith: Can I give my daughter a $l4,000 interest in a rental property I own with a regular deed? I would want to give her $l4,000 interest year by year after that. If I can't do it with a regular deed, how do I have to do it? — P. G.

Answer: Yes, part ownership of the property can serve as the $14,000 the IRS allows you to give to any person each year with no federal gift tax due. And yes, a deed would be the way to do it. And yes, if you intend to eventually turn over the entire property to her, it can be accomplished year by year.

If your daughter were married (and if you wanted to), you could also give her husband a $14,000 share every year.

A lawyer can help with the relatively simple paperwork involved for transferring part interest. Once there's more than one owner, of course, bookkeeping and tax returns will become somewhat more complicated.

Remove Valuables

Dear Edith: I just read your column about staging. Frankly, I don't understand the point. My stepson is selling his house in Omaha, Nebraska. They told him to remove any personal photos and take the laptop off the kitchen desk. But if you go to a model home, there are pictures of a fake family all over the place, and there's a fake laptop on the kitchen desk. What am I missing here? —

Answer: Interesting point. I'm chuckling at the thought of the fake family photo. But I'll bet the laptop is indeed made of cardboard. Before your stepson invites strangers to wander through his house, he would be well-advised to pack away small valuables.

Unhappy Homeowner

Hi, Edith: I would like your take on something concerning my homeownership. I feel trapped. I have owned my home for six years. It was an estate sale. I have always felt that buying it was a horrible mistake. I am 61 years old, my salary is in the mid-thirties, and I am single, so I am the sole wage earner. I only have around $55,000 in savings, 401(k) and all.

My monthly mortgage payment costs $520, which I know is less than it costs for a lot of apartment rentals in my area (which can be $700 to $800 a month). I have put in at least $6,000 in repairs and updates these past six years. A lot of costly work will have to be done in the near future, such as a new furnace, kitchen sink and front porch (the porch estimate is $6,000 to $10,000). If you were in my situation, would you sell the house? People are telling me, "It's building equity!" but I feel the home is draining me financially and just causing lots of stress! — B., [email protected]

Answer: If you're asking for permission to sell the house, I'm giving it. No single financial plan is right for everyone, and homeowning is obviously not for you. Even if your monthly mortgage payment includes property tax and insurance, you've spent enough in maintenance over the years that you could just as well have been renting.

Yes, real estate is usually a good investment. And it does build equity. But that doesn't always happen — there's no guarantee. And nobody needs to hold on to a stressful investment that makes them feel trapped.

It won't cost anything or pose any obligation to call a few real estate firms that are active in your neighborhood. Look for firm names on lawn signs or by searching the internet. They'll send agents over, and you'll receive selling advice and estimated sale prices.

By the way, it sounds as if real estate figures in your area are well below the national average. That has nothing to do with your decision, though — it's just an observation.

Selling Inherited House

Dear Edith: When my mother died last winter I inherited her longtime house. It was just sold. I was told we wouldn't owe any capital gains tax on the sale because it was inherited. But then I was told the sale is reported to the IRS. Which is true? Will we have complications? — G.

Answer: Both are true. The IRS will get a report of your sale, and you'll get a copy of the report.

There's no need to panic. The tax people don't know that your property had a current stepped-up cost basis — the value at the time of your mother's death or perhaps a few months after it. So you'll tell them. Your 2016 income tax return will report the sale, showing no profit. It might even show a small loss.

It's always a good idea to seek professional help for a tax return when you've sold real estate during that year.

Contact Edith Lank at, at [email protected] or at 240 Hemingway Drive, Rochester NY 14620.

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