Gift of equity

[milkman]

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.?

[Just-Lisa-Now-]

Dad will need to file a 709 gift tax return.

[IRonMaN]

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

[IRonMaN]

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

[TaxGuyBill]

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]

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

[IRonMaN]

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

[BobKamman]

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?