November 20, 2024 • 15 mins
This week on Ask Todd, Todd Lutsky explains why timing is very important when planning on gifting assets, issues when gifting property, if gifts are tax deductible, and managing inherited property.
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Episode Transcript
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Speaker 1 (00:01):
This is Ask Todd on the Financial Exchange Radio Network.
If you have an existing estate plan or in the
market for one, Todd Letsky is here to answer your
questions and help you plan for a later life. Ask
Todd is presented by Cushing and Dolan, serving Massachusetts and
New England for more than thirty five years, helping families
with a state and tax planning, medicaid planning, and probate law.
(00:22):
Visit Cushingdolan dot com. Now here's Todd Lutsky.
Speaker 2 (00:27):
As promised, we are now joined by the one and
only Todd Lotski from the law firm of Cushing and Dolan.
We've got the phone lines open here at eight eight
eight two zero five two two sixty three. That's the
number to call if you've got a question for Todd.
He answers him right here live on air. That studio
line again is eight eight eight to zero five two
(00:49):
two six three. Last week we did not get to
everyone that we had qued up, so I ask hey,
if you want to make sure that you get your
question answered, you gotta get on early eight eight eight
to zero five two two sixty three. That is the number.
One more time, it's eight eight eight two zero five
two two sixty three to ask your question to a
(01:11):
state planning attorney Todd Lutzky. Mister Lutsky, how are you
doing today?
Speaker 3 (01:17):
I am doing great. How about yourself? Pretty well myself.
Speaker 2 (01:21):
I'm really excited about, uh, this year's upcoming Fibonacci convention.
Speaker 4 (01:26):
Actually Fibonacci Fibonacci. Yeah, I don't know if I know
that Fibonacci numbers.
Speaker 3 (01:32):
Yeah.
Speaker 2 (01:32):
Yeah, this this convention is going to be as big
as the last two put together. Okay, I get it.
There you go, I get it. I knew you'd get there.
I knew you would, Todd. I want to talk a
little bit about gifting since we are in you know,
the holiday season of giving mood, you know, all.
Speaker 3 (01:46):
All that you know stuff.
Speaker 2 (01:48):
Yeah, when it comes to gifting, and specifically a gifting strategy,
a long term one for in a state, when is
the right time to start considering that such that you're
a able to actually use it to manage the size
of your estate, but that you're not causing problems by
gifting too much too early?
Speaker 3 (02:08):
Yeah?
Speaker 4 (02:09):
And I think I think why why tax attorneys like
ourselves are always busy in the year end is November
and December. Like, let's say we've done planning for clients
years ago, right, and you know they generally depending on
the size of their estate. Of course, if it's a
smaller estate, they might not be overly concerned about about
gifting because it's not designed or needed. I should say
(02:31):
to you know, reduce the estate tax. But for larger estates,
you know, and again you could be thinking both for
Massachusetts or your state estate tax and federal you know,
they tend to call, you know, November December, right, it's
a year end deal. Should we make any gifts?
Speaker 3 (02:48):
Sure?
Speaker 4 (02:49):
For two reasons. One, they can check and see how
the estate has done over the years. What have they
has the estate grown much this year? And and do
we need to make a gift? And you know what,
for some people, it's just that year end present interest
exclusion gift. Maybe I don't need to make a ton
of gifts. But remember one of the ways to make
a gift is a present interest exclusion gift, which today
(03:12):
is I believe eighteen thousand dollars per year per person
that you can give away and it's per year. So
as you approach your end, you might say, hey, should
I use my exclusion before I lose it. I know
I get it every year, but why not use it?
If I can write a check any way you want
to anybody you want for that amount or less eighteen
(03:34):
thousand or less, and there is no filing requirement and
no gift tax to be paid, no reporting requirement of
any kind.
Speaker 3 (03:43):
Just easy. So that might be why.
Speaker 2 (03:45):
Talking with Todd Lutski from the law firm of Cushing
and Dolan to ask Todd your estate planning question about
your estate plan call eight eight eight two zero five
two two six three. We do still have room on
the phone lines again at eight eight eight to zero
five two two six three. Make sure you get calling
(04:06):
early so that you can get your question answered by
Todd live on air.
Speaker 3 (04:11):
Again.
Speaker 2 (04:11):
That number is eight eight eight to zero five two
two sixty three. Todd, what kind of issues come up
when someone starts talking about gifting property? Just quick summary
of them?
Speaker 4 (04:23):
Yeah, so property is a is a tough one to
give away. You're mentioning property, which begs the question that
there's many kinds of assets that you can gift. When
you're thinking about gifting property might not be on the forefront,
depending on how quickly you think it might grow. I mean,
if it's gonna balloon in value and you can get
it out of your estate when it's low in value
and have all the growth occur outside the estate, well
(04:45):
that might be helpful. But if it's low basis and
I'm giving away that property, I'm trapping capital gains tax
liability at twenty eight point eight percent at a bare minimum,
not counting depreciation recapture. If in fact it was rental
property that I gave away number one and number two.
If I do that, I might be saving on the
(05:08):
estate tax, but I better be saving more than twenty
eight point eight percent. If it's state tax, I'm saving
state estate tax. It's only ten percent here in mass
But if it's federal in state, it's forty and ten.
It's fifty percent.
Speaker 2 (05:22):
Ah.
Speaker 4 (05:22):
Well, now I'm starting to see the leverage between twenty
eight percent versus fifty percent. And that's because by keeping
a highly increased basis asset our low basis asset, excuse me,
you eliminate the built in gain when you die.
Speaker 2 (05:38):
Talking with Todd Lotski from the law firm of Cushing
and Dolan can still a little bit of room on
the phone lines at eight eight eight to zero five
two two sixty three. We're going to take a quick
break right now, but when we come back, we're gonna
get right to your calls with Todd. That phone number
is eight eight eight to zero five two two six
(06:00):
three Again eight eight eight two zero five two two
sixty three.
Speaker 1 (06:05):
Ask Todd with Todd Lutsky every Wednesday at ten thirty
only here on the Financial Exchange Radio Network. You're listening
to Ask Todd with Todd Lutsky on the Financial Exchange
Radio Network.
Speaker 2 (06:23):
All right, Todd, right to the callers. You want to
chat with your number one? We got Steve in Watertown. Steve,
you are on with Todd Lutsky. What's your question for him?
Speaker 5 (06:33):
Hi, Todd, I'm going of my house and I wanted
to know how we how can she pay me without
me getting screwed? It back one hundred dollars.
Speaker 4 (06:47):
So I gotta ask you a couple of questions because
it sets us a great question and if it was easy,
I would answer it.
Speaker 3 (06:52):
But let me see. So you bought this house together, yes.
Speaker 5 (06:57):
But nothing was on the book. But because I wasn't
working at the time, and we've made a deal where
I paid it down payment. I bought all the furniture, you.
Speaker 4 (07:06):
Know, and then yeah, so hold hold on, hold on,
are you on the deed at all? No, so you're
not on the deed. So when this sells, you are
going to have no taxable event because it's.
Speaker 5 (07:17):
Well, she's not selling, it's just buying my share out.
Speaker 4 (07:21):
So I and how much are you are? Are you
technically owed? Let's call it that way. It's kind of
like you're owed something because you put money into.
Speaker 3 (07:30):
This house, right about one hundred thousand.
Speaker 4 (07:33):
Okay, So again, I'm not sure that's going to be
structured as a sale, right, that's just simply going to
be her writing you a check for one hundred thousand
dollars because she's not selling her house, correct, right, So,
so this is not going to be structured as a
sale in any way. It's not going to even be
reportable to me. It's almost like you could structure it
as a gift. Say, she's just giving you back the
(07:54):
one hundred thousand that you gave her earlier, right, because
in essence, that's what you did. You didn't get the deed,
you didn't buy into her house. You simply gave her
money and she bought furniture, so I would say, at
the end of the day, she's giving it back to you. Now, remember,
is it a taxable gift? Arguably it is. Arguably it
was a taxable gift when you gave it to her,
(08:15):
But at the you know, probably nobody thought it was that.
Nobody filed a seven h nine gift tax return. I
think you should have at the and but don't worry
because either way there's no tax due because each of
you have a thirteen point six million dollar gift tax
exemption to use once in a lifetime thirteen point nine
(08:37):
million come twenty twenty five January one. So I'm gonna say,
tell her to give you the money back, and arguably
it's a gift. You can inform her that she should file,
but no gift taxes will be due. So I think
that's the easiest way to take care of business folks.
That's an easy gift idea, But making gifts in general
(08:59):
is not always so easy. So even here, no one
really thought that this was a gift. But you know what,
sometimes you throw a person's name, on a child's name
or something on a joint broke at your bank account.
Speaker 3 (09:11):
Did you make a gift.
Speaker 4 (09:12):
What if I put a name on a piece of
property like a rental property or a home.
Speaker 3 (09:18):
Have I made a gift?
Speaker 4 (09:19):
Are there any income tax ramifications associated with that gift
now that it's a rental property in a child's name? Wow,
you know these are all what about creditor issues? So, folks,
there's so many ways that there's so many things that
can be impacted when you make a gift.
Speaker 3 (09:37):
You really need to.
Speaker 4 (09:38):
Understand how to make it and if you should make it,
and again, maybe not putting it in the hands of
children is a better way to do it. Put it
in the hands of a gifting trust. Folks, lots to
think about. Figure out what's the best way for you
to make a gift or not to gift eight six
six eight four eight five six nine or Legal Exchange
(10:02):
Show dot com. Get the guide Making the Most of
Gifting Assets eight six six eight four eight five six
nine nine or Legal Exchange Show dot Com.
Speaker 2 (10:13):
Todd, I've got another one here for you. Let's go
to Jeff on the Cape. Jeff, what is your question
for Todd?
Speaker 6 (10:19):
Good morning, Todd, Really enjoy the show.
Speaker 3 (10:22):
Thank you.
Speaker 5 (10:23):
Wanted to ask you a question about the gift asset.
Is that tax deductible? Well, the person that is giving
the gift to a family.
Speaker 3 (10:33):
Member, so great, great question.
Speaker 4 (10:36):
Not only is it not tax deductible. I'm sure you're
familiar with the phrase, no good deed goes unpunished. Right,
So here's the story. It is the giver, the giver,
not the recipient who has to pay a gift tax.
The recipient never has a gift tax when they receive it,
(10:56):
and the recipient doesn't have an income tax when they
receive it. But the giver once again has to pay
potentially subject to gift tax.
Speaker 3 (11:07):
Not only do.
Speaker 4 (11:08):
They are they subject to gift tax. There is no
income tax ramification associated with a gift ever, so it's
not income taxable, but it's also not income deductible.
Speaker 3 (11:20):
So there you go. No good deed goes unpunished.
Speaker 2 (11:24):
Keep moving for you here, Todd, Let's go to Casey
in Plymouth. Casey, you are now on with Todd Lutsky.
Speaker 6 (11:32):
Hi, Todd, I just have a question. So my husband
and his siblings inherited a property from their mom when
she passed away. His sister has lived in the property
and now years, you know, several years later, is buying
the siblings out well below market value. I'm just wondering,
with what he makes on that property from the sister,
(11:54):
how does he avoid any type of tax if possible,
considering they're making a lot less than they would have
if it was on the market.
Speaker 3 (12:02):
What's the value of the property?
Speaker 6 (12:06):
Probably four hundred and call.
Speaker 3 (12:09):
It four to fifty.
Speaker 4 (12:10):
So if it's four fifty, so here's here's the deal.
How long ago did did the individual die that they
caused them to inherit the property.
Speaker 5 (12:20):
It's been.
Speaker 4 (12:22):
Roughly three years three years great, So here's the story
on the date of death. And there's a lot going
on here because it's going to be treated technically as
a part sale, part gift because it sounds like they're
buying it for way under fair market value. So a
couple of things going on. One on the date of
death three four years ago, all the siblings that inherited
(12:44):
this got it with a step up in basis, which
is wonderful. Right, So if the property back then was
worth three hundred and fifty thousand dollars three years ago,
then they were to sell it right then and there
their gain would be zero because their base would be
three point fifty. So he got a one third step
up in basis, so one third of the value on
(13:07):
the date of death is his cost basis. Now, if
he sells it to her or to the sister now
and he gets more than what his cost basis was
for his peace, so his one third of the proceeds,
if it exceeds his cost basis, which was one third
of the value on the date of death, then that
(13:28):
difference will be treated as a taxable a capital gain,
and since he hasn't been living there, then he has
to pay capital gains tax on that piece. Now, I
suspect that it's very possible, since they're buying it at
less than fair market value, that the piece that he
(13:50):
gets his one third, if you will, might be less
than or equal to the fair market value his basis,
which was again one third of the fair market value
on the date of death, because it wasn't that long ago,
So it may end up being a wash for him.
He probably won't be able to generate a loss, but
(14:11):
he might not have a large capital gain, so that's
good for him. On her end, however, you may not
care about this, but just for educational purposes for the radio.
On her end, she's buying the property, but she's buying
it for less than fair market value, so arguably she's
(14:31):
not going to have much of an issue at all
because she's the buyer. But I wonder if on his end,
actually back on his end, he's making a part gift,
so he might have no capital gains tax, but because
he's selling it for less than fair market value, he
might have a gift tax associated with it. Part sale,
part gift. Sorry for that rush, but there's a lot
(14:52):
going on in this case.
Speaker 3 (14:53):
Gifting's not easy.
Speaker 2 (14:54):
Mister Lutsky, thank you so much for joining us today.
Speaker 3 (14:57):
Always a pleasure.
Speaker 1 (14:59):
This has been Ask Todd on the Financial Exchange Radio network.
Ask Todd with Todd. Lutsky has been presented by Cushing
and Dolan, serving Massachusetts and New England for more than
thirty years, helping families with the state and tax planning,
Medicaid planning, and probate law. Call eight hundred three nine
three four thousand one or visit Cushingdolan dot com. The
views expressed in this segment are solely those of Cushing
(15:20):
and Dolan. Armstrong Advisory does not provide any legal or
tax advice. Please consult with your illegal or tax advisor
on such matters. Cushing and Armstrong do not endorse each
other and are not affiliated
This is Ask Todd on the Financial Exchange Radio Network.
If you have an existing estate plan or in the
market for one, Todd Letsky is here to answer your
questions and help you plan for a later life. Ask
Todd is presented by Cushing and Dolan, serving Massachusetts and
New England for more than thirty five years, helping families
with a state and tax planning, medicaid planning, and probate law.
(00:22):
Visit Cushingdolan dot com. Now here's Todd Lutsky.
Speaker 2 (00:27):
As promised, we are now joined by the one and
only Todd Lotski from the law firm of Cushing and Dolan.
We've got the phone lines open here at eight eight
eight two zero five two two sixty three. That's the
number to call if you've got a question for Todd.
He answers him right here live on air. That studio
line again is eight eight eight to zero five two
(00:49):
two six three. Last week we did not get to
everyone that we had qued up, so I ask hey,
if you want to make sure that you get your
question answered, you gotta get on early eight eight eight
to zero five two two sixty three. That is the number.
One more time, it's eight eight eight two zero five
two two sixty three to ask your question to a
(01:11):
state planning attorney Todd Lutzky. Mister Lutsky, how are you
doing today?
Speaker 3 (01:17):
I am doing great. How about yourself? Pretty well myself.
Speaker 2 (01:21):
I'm really excited about, uh, this year's upcoming Fibonacci convention.
Speaker 4 (01:26):
Actually Fibonacci Fibonacci. Yeah, I don't know if I know
that Fibonacci numbers.
Speaker 3 (01:32):
Yeah.
Speaker 2 (01:32):
Yeah, this this convention is going to be as big
as the last two put together. Okay, I get it.
There you go, I get it. I knew you'd get there.
I knew you would, Todd. I want to talk a
little bit about gifting since we are in you know,
the holiday season of giving mood, you know, all.
Speaker 3 (01:46):
All that you know stuff.
Speaker 2 (01:48):
Yeah, when it comes to gifting, and specifically a gifting strategy,
a long term one for in a state, when is
the right time to start considering that such that you're
a able to actually use it to manage the size
of your estate, but that you're not causing problems by
gifting too much too early?
Speaker 3 (02:08):
Yeah?
Speaker 4 (02:09):
And I think I think why why tax attorneys like
ourselves are always busy in the year end is November
and December. Like, let's say we've done planning for clients
years ago, right, and you know they generally depending on
the size of their estate. Of course, if it's a
smaller estate, they might not be overly concerned about about
gifting because it's not designed or needed. I should say
(02:31):
to you know, reduce the estate tax. But for larger estates,
you know, and again you could be thinking both for
Massachusetts or your state estate tax and federal you know,
they tend to call, you know, November December, right, it's
a year end deal. Should we make any gifts?
Speaker 3 (02:48):
Sure?
Speaker 4 (02:49):
For two reasons. One, they can check and see how
the estate has done over the years. What have they
has the estate grown much this year? And and do
we need to make a gift? And you know what,
for some people, it's just that year end present interest
exclusion gift. Maybe I don't need to make a ton
of gifts. But remember one of the ways to make
a gift is a present interest exclusion gift, which today
(03:12):
is I believe eighteen thousand dollars per year per person
that you can give away and it's per year. So
as you approach your end, you might say, hey, should
I use my exclusion before I lose it. I know
I get it every year, but why not use it?
If I can write a check any way you want
to anybody you want for that amount or less eighteen
(03:34):
thousand or less, and there is no filing requirement and
no gift tax to be paid, no reporting requirement of
any kind.
Speaker 3 (03:43):
Just easy. So that might be why.
Speaker 2 (03:45):
Talking with Todd Lutski from the law firm of Cushing
and Dolan to ask Todd your estate planning question about
your estate plan call eight eight eight two zero five
two two six three. We do still have room on
the phone lines again at eight eight eight to zero
five two two six three. Make sure you get calling
(04:06):
early so that you can get your question answered by
Todd live on air.
Speaker 3 (04:11):
Again.
Speaker 2 (04:11):
That number is eight eight eight to zero five two
two sixty three. Todd, what kind of issues come up
when someone starts talking about gifting property? Just quick summary
of them?
Speaker 4 (04:23):
Yeah, so property is a is a tough one to
give away. You're mentioning property, which begs the question that
there's many kinds of assets that you can gift. When
you're thinking about gifting property might not be on the forefront,
depending on how quickly you think it might grow. I mean,
if it's gonna balloon in value and you can get
it out of your estate when it's low in value
and have all the growth occur outside the estate, well
(04:45):
that might be helpful. But if it's low basis and
I'm giving away that property, I'm trapping capital gains tax
liability at twenty eight point eight percent at a bare minimum,
not counting depreciation recapture. If in fact it was rental
property that I gave away number one and number two.
If I do that, I might be saving on the
(05:08):
estate tax, but I better be saving more than twenty
eight point eight percent. If it's state tax, I'm saving
state estate tax. It's only ten percent here in mass
But if it's federal in state, it's forty and ten.
It's fifty percent.
Speaker 2 (05:22):
Ah.
Speaker 4 (05:22):
Well, now I'm starting to see the leverage between twenty
eight percent versus fifty percent. And that's because by keeping
a highly increased basis asset our low basis asset, excuse me,
you eliminate the built in gain when you die.
Speaker 2 (05:38):
Talking with Todd Lotski from the law firm of Cushing
and Dolan can still a little bit of room on
the phone lines at eight eight eight to zero five
two two sixty three. We're going to take a quick
break right now, but when we come back, we're gonna
get right to your calls with Todd. That phone number
is eight eight eight to zero five two two six
(06:00):
three Again eight eight eight two zero five two two
sixty three.
Speaker 1 (06:05):
Ask Todd with Todd Lutsky every Wednesday at ten thirty
only here on the Financial Exchange Radio Network. You're listening
to Ask Todd with Todd Lutsky on the Financial Exchange
Radio Network.
Speaker 2 (06:23):
All right, Todd, right to the callers. You want to
chat with your number one? We got Steve in Watertown. Steve,
you are on with Todd Lutsky. What's your question for him?
Speaker 5 (06:33):
Hi, Todd, I'm going of my house and I wanted
to know how we how can she pay me without
me getting screwed? It back one hundred dollars.
Speaker 4 (06:47):
So I gotta ask you a couple of questions because
it sets us a great question and if it was easy,
I would answer it.
Speaker 3 (06:52):
But let me see. So you bought this house together, yes.
Speaker 5 (06:57):
But nothing was on the book. But because I wasn't
working at the time, and we've made a deal where
I paid it down payment. I bought all the furniture, you.
Speaker 4 (07:06):
Know, and then yeah, so hold hold on, hold on,
are you on the deed at all? No, so you're
not on the deed. So when this sells, you are
going to have no taxable event because it's.
Speaker 5 (07:17):
Well, she's not selling, it's just buying my share out.
Speaker 4 (07:21):
So I and how much are you are? Are you
technically owed? Let's call it that way. It's kind of
like you're owed something because you put money into.
Speaker 3 (07:30):
This house, right about one hundred thousand.
Speaker 4 (07:33):
Okay, So again, I'm not sure that's going to be
structured as a sale, right, that's just simply going to
be her writing you a check for one hundred thousand
dollars because she's not selling her house, correct, right, So,
so this is not going to be structured as a
sale in any way. It's not going to even be
reportable to me. It's almost like you could structure it
as a gift. Say, she's just giving you back the
(07:54):
one hundred thousand that you gave her earlier, right, because
in essence, that's what you did. You didn't get the deed,
you didn't buy into her house. You simply gave her
money and she bought furniture, so I would say, at
the end of the day, she's giving it back to you. Now, remember,
is it a taxable gift? Arguably it is. Arguably it
was a taxable gift when you gave it to her,
(08:15):
But at the you know, probably nobody thought it was that.
Nobody filed a seven h nine gift tax return. I
think you should have at the and but don't worry
because either way there's no tax due because each of
you have a thirteen point six million dollar gift tax
exemption to use once in a lifetime thirteen point nine
(08:37):
million come twenty twenty five January one. So I'm gonna say,
tell her to give you the money back, and arguably
it's a gift. You can inform her that she should file,
but no gift taxes will be due. So I think
that's the easiest way to take care of business folks.
That's an easy gift idea, But making gifts in general
(08:59):
is not always so easy. So even here, no one
really thought that this was a gift. But you know what,
sometimes you throw a person's name, on a child's name
or something on a joint broke at your bank account.
Speaker 3 (09:11):
Did you make a gift.
Speaker 4 (09:12):
What if I put a name on a piece of
property like a rental property or a home.
Speaker 3 (09:18):
Have I made a gift?
Speaker 4 (09:19):
Are there any income tax ramifications associated with that gift
now that it's a rental property in a child's name? Wow,
you know these are all what about creditor issues? So, folks,
there's so many ways that there's so many things that
can be impacted when you make a gift.
Speaker 3 (09:37):
You really need to.
Speaker 4 (09:38):
Understand how to make it and if you should make it,
and again, maybe not putting it in the hands of
children is a better way to do it. Put it
in the hands of a gifting trust. Folks, lots to
think about. Figure out what's the best way for you
to make a gift or not to gift eight six
six eight four eight five six nine or Legal Exchange
(10:02):
Show dot com. Get the guide Making the Most of
Gifting Assets eight six six eight four eight five six
nine nine or Legal Exchange Show dot Com.
Speaker 2 (10:13):
Todd, I've got another one here for you. Let's go
to Jeff on the Cape. Jeff, what is your question
for Todd?
Speaker 6 (10:19):
Good morning, Todd, Really enjoy the show.
Speaker 3 (10:22):
Thank you.
Speaker 5 (10:23):
Wanted to ask you a question about the gift asset.
Is that tax deductible? Well, the person that is giving
the gift to a family.
Speaker 3 (10:33):
Member, so great, great question.
Speaker 4 (10:36):
Not only is it not tax deductible. I'm sure you're
familiar with the phrase, no good deed goes unpunished. Right,
So here's the story. It is the giver, the giver,
not the recipient who has to pay a gift tax.
The recipient never has a gift tax when they receive it,
(10:56):
and the recipient doesn't have an income tax when they
receive it. But the giver once again has to pay
potentially subject to gift tax.
Speaker 3 (11:07):
Not only do.
Speaker 4 (11:08):
They are they subject to gift tax. There is no
income tax ramification associated with a gift ever, so it's
not income taxable, but it's also not income deductible.
Speaker 3 (11:20):
So there you go. No good deed goes unpunished.
Speaker 2 (11:24):
Keep moving for you here, Todd, Let's go to Casey
in Plymouth. Casey, you are now on with Todd Lutsky.
Speaker 6 (11:32):
Hi, Todd, I just have a question. So my husband
and his siblings inherited a property from their mom when
she passed away. His sister has lived in the property
and now years, you know, several years later, is buying
the siblings out well below market value. I'm just wondering,
with what he makes on that property from the sister,
(11:54):
how does he avoid any type of tax if possible,
considering they're making a lot less than they would have
if it was on the market.
Speaker 3 (12:02):
What's the value of the property?
Speaker 6 (12:06):
Probably four hundred and call.
Speaker 3 (12:09):
It four to fifty.
Speaker 4 (12:10):
So if it's four fifty, so here's here's the deal.
How long ago did did the individual die that they
caused them to inherit the property.
Speaker 5 (12:20):
It's been.
Speaker 4 (12:22):
Roughly three years three years great, So here's the story
on the date of death. And there's a lot going
on here because it's going to be treated technically as
a part sale, part gift because it sounds like they're
buying it for way under fair market value. So a
couple of things going on. One on the date of
death three four years ago, all the siblings that inherited
(12:44):
this got it with a step up in basis, which
is wonderful. Right, So if the property back then was
worth three hundred and fifty thousand dollars three years ago,
then they were to sell it right then and there
their gain would be zero because their base would be
three point fifty. So he got a one third step
up in basis, so one third of the value on
(13:07):
the date of death is his cost basis. Now, if
he sells it to her or to the sister now
and he gets more than what his cost basis was
for his peace, so his one third of the proceeds,
if it exceeds his cost basis, which was one third
of the value on the date of death, then that
(13:28):
difference will be treated as a taxable a capital gain,
and since he hasn't been living there, then he has
to pay capital gains tax on that piece. Now, I
suspect that it's very possible, since they're buying it at
less than fair market value, that the piece that he
(13:50):
gets his one third, if you will, might be less
than or equal to the fair market value his basis,
which was again one third of the fair market value
on the date of death, because it wasn't that long ago,
So it may end up being a wash for him.
He probably won't be able to generate a loss, but
(14:11):
he might not have a large capital gain, so that's
good for him. On her end, however, you may not
care about this, but just for educational purposes for the radio.
On her end, she's buying the property, but she's buying
it for less than fair market value, so arguably she's
(14:31):
not going to have much of an issue at all
because she's the buyer. But I wonder if on his end,
actually back on his end, he's making a part gift,
so he might have no capital gains tax, but because
he's selling it for less than fair market value, he
might have a gift tax associated with it. Part sale,
part gift. Sorry for that rush, but there's a lot
(14:52):
going on in this case.
Speaker 3 (14:53):
Gifting's not easy.
Speaker 2 (14:54):
Mister Lutsky, thank you so much for joining us today.
Speaker 3 (14:57):
Always a pleasure.
Speaker 1 (14:59):
This has been Ask Todd on the Financial Exchange Radio network.
Ask Todd with Todd. Lutsky has been presented by Cushing
and Dolan, serving Massachusetts and New England for more than
thirty years, helping families with the state and tax planning,
Medicaid planning, and probate law. Call eight hundred three nine
three four thousand one or visit Cushingdolan dot com. The
views expressed in this segment are solely those of Cushing
(15:20):
and Dolan. Armstrong Advisory does not provide any legal or
tax advice. Please consult with your illegal or tax advisor
on such matters. Cushing and Armstrong do not endorse each
other and are not affiliated
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