lAND SALE GIFT

[TAXMAN]

Ok here is what I know. 10 years ago tp and spouse divorced. Spouse kept a cabin and some land. 3 years ago TP died leaving all to son(none to mom). Now son is selling property he got but to make sale work he also needs property that mom has. So mom gifts son her property by deed of gift.(may 2021) Then they draw up an agreement (may 2021)that if property sold for more than 600k, then son would pay mom 170k.(Closing slated for Aug 2021 property sells for 610k).

Is this an incomplete gift being treated as though it never happed and mom gets taxed on 170k? or is it possible that mom has a gift to son and then son  gifts to mom.(sounds like a sham) and son would pay tax on entire proceeds?

I may not have explained clearly but if you have some feel about this please respond. Many thanks.

 

[Lee B]

24 minutes ago, TAXMAN said:

. . . . .  or is it possible that mom has a gift to son and then son  gifts to mom.(sounds like a sham) and son would pay tax on entire proceeds?

 

 

Bingo

[BulldogTom]

I think the essence of the deal is that Mom sold property to son for $170K.  The fact that it was not completed until the sale was closed by son not withstanding.  That is her transaction, basis being whatever it was in her hands to get to gain.

Son Sold his property and the property acquired from mom for 610K.   His basis is the DoD value + the 170K he paid mom for the other property.

The proximity of the gift, the sale, and the written agreement bring me to this conclusion.

Tom
Sparks, NV

[DANRVAN]

9 hours ago, TAXMAN said:

Is this an incomplete gift being treated as though it never happed and mom gets taxed on 170k? or is it possible that mom has a gift to son and then son  gifts to mom.(sounds like a sham) and son would pay tax on entire proceeds?

It is a part sale / part gift.  See § 1.1015-4 for details.

 

[DANRVAN]

9 hours ago, TAXMAN said:

(Closing slated for Aug 2021 property sells for 610k).

How much of that was for mom's property?

[DANRVAN]

6 hours ago, BulldogTom said:

the essence of the deal is that Mom sold property to son for $170K.

If fmv of mom's property was greater than 170k, then partial sale and partial gift.

[TAXMAN]

Mom's 170k was based on current county assessments and tax bills. I am inclined to skip over all the gift scenarios and treat it as a sale to the buyers. Attorney indicated that would be his way of doing it and issued 2 1099's respective of their share of proceeds.

[DANRVAN]

On 7/29/2021 at 8:37 AM, TAXMAN said:

Attorney indicated that would be his way of doing it and issued 2 1099's respective of their share of proceeds.

So is there going to be a closing statement showing who was the actual seller/owner of the property sold?

On 7/29/2021 at 8:37 AM, TAXMAN said:

I am inclined to skip over all the gift scenarios and treat it as a sale to the buyers.

If mom is compensated for fmv of her property, then the net tax result would be the same, although son would be the actual seller of the property mom deeded to him.