QUESTION
Are we subject to gift tax if it is documented that we are paying for 15% of the property and only own 15% of the property?
Asked on Aug 09th, 2013 on Taxation - Missouri
More details to this question:
I live in the state of New York, but I am assisting my parents with the purchase of a house in Tennessee. We are setting up a tenants in common deed (My parents, myself, and my wife). My wife and I will contribute 15% and have a document drawn up by the lawyer that states we own only 15%. My question is about gift tax. The bank is asking my parents to fill out a gift tax form. From my research, I think this is for situations where there is a tenants in common deed, but the interests don't match the contributions. In our case, we will have documented proof that we invested 15% and only own 15%. No gift is being made in this case. Our money is simply buying a portion of the property. So are we subject to gift tax or need to fill out forms pertaining to that? Thanks in advance!
2 ANSWERS
Based upon the facts that you have provided, I do not believe that you should have any gift tax liabilities. The bank may be requesting you fill out a return in order to satisfy its reporting obligations in the event that the share of the house received was not equal to the consideration granted. If no gift is being made and the bank is requiring a return, it should be sufficient to file a return reporting a $0 gift.
Answered on Aug 13th, 2013 at 7:15 PM
Bankruptcy Attorney serving Florissant, MO
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You only have to file a gift tax return after a gift is complete. It doesn't sound like a gift to me. I would tell the bank you won't do the gift tax return. If they have a problem with that, I would go to another bank.
Answered on Aug 12th, 2013 at 11:58 AM