Legal Question in Tax Law in New York

Re: Avoid Capitol Gains Tax

There should not be any capital gains on the gift. You should be concerned about the potential gift and estate tax implications. You should speak with an estate planning attorney to determine how best to structure the gift.

Good luck

Anthony

Re: Avoid Capitol Gains Tax

You will be required to file a gift tax return. While I don't know your particular situation, it is probable that you will not have to pay any gift tax.

There are no capital gains issues with such a transfer. However, gains tax issues may arise in the future.

If your are concerned about income, estate, and gift tax issues, and you should be--there may be better ways to accomplish your objectiveness. Please feel free to contact me if you would like my assistance.

Re: Avoid Capitol Gains Tax

There are many ways to skin a cat. Since you have lived in the house for more than 2 of the past five years, and are eligible for the tax break for sale of your primary residence, here is my suggestion.Since the gain you face is under $500,000 ($575,000 values less $85,000 cost=$490,000) sell the house to them and report the gain. As a married couple the tax laws allow you up to $500,000 of tax-free gain, as a married couple filing a joint tax return. Additionally, each of you, presuming you have not used up your available lifetime gift tax exclusion, can give your son up to $1,000,000 each in tax-free gifts. This is over and above the $11,000 per year in annual tax-free gifts you can give to anyone. Thus, you can use a combination of annual gifting and lifetime gifting to cover the cost of the house. This accomplishes several things that would not exist if you just gifted them the house. (1) By actually buying the house from you, they get a new cost basis of their purchase price, rather than your "transferred" cost basis if you merely gifted them the house itself. (2) You take a mortgage at the sale to them, which you "forgive" using a combination of annual and lifetime gifdts, either in one year or over time. (3) You report the sale at the selling price, but use your eligible joint exclusion so no income taxes are paid. (4) You pay no gift taxes on the annual and/or lifetime gifts, presuming you still can make lifetime gifts, as stated above. The net result is that you may pay higher recording fees, but they will be significantly less than the potential income taxes if any gain had to be reported by you, or by your son when he ultimately sold it himself, but has to report his cost at your original cost. The foregoing is not intended to be a formal legal opinion, but merely a response to a question. I suggest you confirm the information both with your accountant, if you use one, and/or a tax attorney familiar with gifts and how they could be best made to cover your concerns.