schirallicpa Posted March 5, 2021 Report Share Posted March 5, 2021 Client had a rental property that he gave to his son. The "one dollar" transaction. The property was valued at$107000. So I believe a gift tax return is applicable. But on the disposition, I believe I need to report a sale. But do I show as sold at the same value that we report the gift as being, the 107000? Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted March 5, 2021 Report Share Posted March 5, 2021 Because it is a bargain sale to a related party, I believe you cannot take a loss on the transaction. But if it was structured as a gift, then the son would get carryover basis and the dad would file the gift tax return. Tom Modesto, CA Quote Link to comment Share on other sites More sharing options...
jklcpa Posted March 5, 2021 Report Share Posted March 5, 2021 1 hour ago, schirallicpa said: Client had a rental property that he gave to his son. The "one dollar" transaction. The property was valued at$107000. So I believe a gift tax return is applicable. But on the disposition, I believe I need to report a sale. But do I show as sold at the same value that we report the gift as being, the 107000? No, on the donor's return just handle this as removed from service and make sure that depreciation is correct for the year. You don't want to record a sale and trigger depreciation recapture or PALs to be allowed as if it is a sale. Reporting the gift on Form 709 is enough of a trail for the IRS to know that the property is no longer in the donor's hands. Son will have dual basis if FMV is less than donor's basis at the time of gift, for purposes of calculating gain/loss if son ever sells. If son is keeping it as a rental, for depreciation purposes his basis is the adjusted basis at the time of the gift, and the depreciation starts over with the appropriate method, convention, and life. If there are PALs, those are NOT passed through, but those PALs will be an increase to son's basis. Son will need details of basis so that if he ever sells the property, he will be able to calculate any gain that should be ordinary gain due to depreciation recapture that donor would have been subject to had the property been sold instead of gifted. TP will probably use unified credit instead of paying gift tax, but if any gift tax is actually paid on this transaction, then that would add to basis. 4 Quote Link to comment Share on other sites More sharing options...
schirallicpa Posted March 5, 2021 Author Report Share Posted March 5, 2021 Ok - thank you! I thought I had to report a sale of the property. Glad I asked. This forum is the best. Quote Link to comment Share on other sites More sharing options...
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