Legal Question in Tax Law in California
Real estate capital gain tax
Hello, The Parents, are foreigners who bought a house for 350k under their names 10 years ago. The house has market value of 800k currently. Their daughter 24 years old who was born in the U.S is a U.S. citizen. The parents are thinking to give the house to the daughter. Does the daughter have to pay capital gain tax? or anyother tax associates with this transaction ?
and how much it will be?
(the parents gave up their green cards 7 years ago, but they are still paying property tax every year)
Thank you
2 Answers from Attorneys
Re: Real estate capital gain tax
There is a little bit of confussion in the form of your question. Have the parents been living in the property during this time? What is their residence status right now?
If the property is gifted to the daughter, she will not need to pay capital gains taxes immediately. However, the basis of the property will stay the same. There could be gift tax consequences and eventually, capital gains taxes.
It would be better if the parents establish a trust for ownership, making the daughter the beneficiary. Upon the death of the parents, the daughter would obtain ownership of the property with the tax basis being the value of the property at the time of death, avoiding capital gains.
There are other ways to effect a transfer as well, avoiding C.G., but would need to discuss more fully with you.
Re: Real estate capital gain tax
Are they now us citizens. It might be better to keep in their name, depending on facts, if they will live in it untilt hey die, to get step up in basis to get rid of an estate tax. Again, it depends on further facts.
JOEL SELIK
Attoreny At Law
Masters of Law-Taxation
www.taxworkout.com
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