Gift of rental property

[Tax Prep by Deb]

My client has a piece of rental property that they have had for some time. They are getting up in years and are considering gifting the property to their daughter.

The purchased the property in the early 1980's for $86,000.00 of which $56,000 was for the building and $30,000.00 was for the land. The $56,000.00 has been completely depreciated.

Besides doing the gift tax return how do I dispose of this on their tax return? It doesn't seem like it would be a sale however I realize I have to do something with the asset. Any ideas?

Deb!

[imjulier]

How about advising them not to do the gift at all? That passes on property at zero basis but if it gets inherited, depending on the rules in whatever year, maybe stup up in basis will apply. If they insist though, maybe you can use the "converted to personal use" option which will not show the disposition on the tax return which I think would be accuarte in this situation. Another thought, gifting will also pass on taxable income that may be taxed to the parents at a lower rate....unless you know the property isn't profitable.

Julie