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Gift of equity

milkman
Level 3

Client sold property to son.  They gave a gift of equity ($66250.00) to son who used this gift as a down payment to purchase home.  Is there a tax liability to son or parents for this gift.?

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7 Comments 7
Just-Lisa-Now-
Level 15
Level 15

Dad will need to file a 709 gift tax return.


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
IRonMaN
Level 15

Nope.  Gifts aren't taxable to the kid opening up the present from mom and dad.


Slava Ukraini!
IRonMaN
Level 15

And mom will also want to file that gift tax return along with dad.


Slava Ukraini!
TaxGuyBill
Level 15

Be aware that for purposes of reporting the sale price and for the son's Basis in the property, in most cases the amount you use is the cost AFTER the so-called "gift of equity".  So if the contract says $330,000 with a "gift of equity" of $66,000, the actual sales price for tax purposes is $264,000 (and that is the Basis of the son too).

In the event that $264,000 is lower than the parents' Basis or if Gift Tax was paid, that can alter things, but that is not common.

jeffmcpa2010
Level 11

Some questions from paid tax preparers make me run for rcooleys fireball...

IRonMaN
Level 15

You should have been visiting here for as long as I have --------------------- you would never leave his Fireball.😲


Slava Ukraini!
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BobKamman
Level 15

Is son married?  Did wife join in purchase?  Mom and Dad can give son and wife $64,000 in 2022 with no 709 required, or $68,000 if this happened in 2023.  By the way, what is the penalty for not filing the Form 709?