tax consequences on gift house

frank

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my sil is living with a partner she has been with for quite a few years but they are not married. the partner wants to gift a property to my sil son who is not a relative to her partner. I think there will be tax consequences for giving away a piece of property to someone who is not a relative. any ideas of what type of tax consequences there will be? it is written in his will that the son will inherit the property upon death. The value of the property is around 100k.
 
1. The giver is responsible for any gift tax if applicable. I doubt there will be an issue here.

2. When gifted a property, the son will take on the partner’s cost basis for the property. When the son chooses to sell the house, he may be responsible for paying capital gains taxes. If the son chooses to live in the house for two of the last five years he owns the property, he will get a $250,000 exemption upon sale, or $500,000 if joint owned with a spouse.
 
No gift tax, but the partner must report the amount of the gift over the exclusion amount, and it will be deducted from his lifetime exemption. The exclusion is $19K in 2025, and if the son is married it can be a gift to their spouse, making the exclusion $38K. If your SIL and partner were married that exclusion is doubled again.

Dash man is correct on the basis transferring to the son.
 
As far as I know, you can give money or property to anyone you like. If the property is worth over the estate tax exemption limit of $19k per year (for 2025), the giver has to submit IRS form 709 Instructions for Form 709 (2024) | Internal Revenue Service The amount over the yearly exemption then goes against the lifetime estate exclusion which is currently $11.18 million but scheduled to drop back to $5 million after 2025.

A second issue is that with a gift made while living, the recipient inherits the giver's basis in the property, so that if the recipient subsequently sells, there may be a large taxable gain. Whereas, if the property passes by will after death, the recipient gets a step up basis.
 
Yes, definitely tax consequences. The giver MIGHT have a gift tax (but unlikely due to the lifetime limit). BUT the recipient will get the property with a cost basis based on the original purchase price, not the value when gifted. That could mean a large capital gains hit further down the line.
 
frank, I am not following. First you say "wants to gift a property to my sil son" but then you say "it is written in his will that the son will inherit the property upon death". Does he want to give the property while he is still alive, or does he want to will it to the son at his death, or am I just not understanding this correctly? The fact that earlier commenters haven't asked this makes me think I have missed something.

The only special tax treatment involves gifts to a spouse, so neither SIL nor her son qualifies for that.
 
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