Welcome back! Ask questions, get answers, and join our large community of tax professionals.
cancel
Showing results for 
Search instead for 
Did you mean: 

May a rental expense paid as a gift by the father be deductible by the owner son?

Highlighted
Level 1

A father paid directly for repairs of the rental house, as a gift to the son who owns the rental house.  May the son deduct this rental expense on Schedule E?  (The father is not a tenant, but simply wanted to help the son.)  

Labels (1)
0 Cheers
1 Solution

Accepted Solutions
Highlighted
Level 10
Level 10

Yes, as father just gave son money to pay bills. If it was over $15,000 then father would need to file 709

View solution in original post

3 Replies 3
Highlighted
Level 10
Level 10

Yes, as father just gave son money to pay bills. If it was over $15,000 then father would need to file 709

View solution in original post

Highlighted
Level 1

Thank-you!

0 Cheers
Highlighted
Level 3

I think the previous answer may be in error. A "gift" by it's nature is not taxable income as it is given       " out of affection or in the nature of gratitude for the expression of generous feelings for or toward the recipient" and not as compensation, barter, tips or trade for labors performed.  You stated that the Father paid these expenses as a gift to the Son. From the language you wrote, the Father paid these expenses from his own funds, not from the funds of the Son, or funds the Father had "given" the Son. Had the Father given the Son these monies, and the Son used them for the expenses; then I would say yes, the Son may deduct these as an expense. IF, they were not "capital repairs" that extended or prolonged the useful life of the building, at which time they would be considered Capital expenses and need to be depreciated. However, you state that the Father paid for these "as a gift" to the Son.  Gifts are non taxable, but the payment of an expense for an income producing property cannot be paid by another person and then deducted by the owner of the property. The Father would need to be an owner of the property to be able to deduct these expenses; OR the Father would have to give the Son these monies and the Son would subsequently pay for the expenses. Should this come under review or examination and the information revealed that Dad paid for these expenses, I think the Son would see those expenses disappear from the Schedule E and the Report of Examination Changes reflect such. Only a true gift to the recipient, with no strings attached as to the purpose or use of the gift by the recipient could be used for any purpose; to include the payment of repairs and the like. While there weren't any stated "strings" or other demands placed upon the gift, the Father paid the expense, not the Son. The "gift" was tax free to the son, but it this case the monies did not pass first before the payment of the expense. This one would not pass muster with a TCO, Revenue Officer or Revenue Agent. Not if the statement was: "My Dad paid for these expenses as a gift to me". And it is never wise to mislead an IRS official in the conduct of their inquiries. Suspicion breeds "a larger shovel to dig a little deeper and see what else can be uncovered."