We are in Arkansas.
Hi guys!
We want to give our daughter a rent house we own and use the deferred gift tax exemption by filling a gift tax return. So we could each gift her $19,000 for a total of $38,000 and the rest would be accounted for on the gift tax return. We bought the house in 2013 for $120,000. It is worth about $240,000 now. When we bought it, it was one of the replacement properties in a 1031 exchange we did.
For the value of the house, would we use the current value or our purchase price when we bought it, and does being acquired as part of a 1031 exchange enter into it?
Thank you in advance for your input!
Posted by RodinDestin
3 Comments
The value for gift tax purposes is the current fair market value. Get a qualified appraisal and include it with the gift tax return.
You should be aware that your daughter will take your adjusted basis in the property, so you’re essentially giving her the deferred tax liability from the 1031 exchange, as well as the gains since you bought it.
The gift is $240,000. Your daughter’s basis is the $120,000 minus the deferred gain from the exchange.
Is there a reason you’re not planning on passing it down to her when you both die for stepped up basis?