Tax consequences of real estate gifts

Inheriting property eliminates headaches

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DEAR BOB: What are the benefits and tax consequences for transferring title to one of my adult children for a rental property? I bought the property in 1992 for $78,000, converted it to a rental in 1999, and it is currently worth about $288,000. Will I have to pay any gift tax? – Claude R. DEAR CLAUDE: Probably not. Because your real estate gift to your adult child exceeds the $11,000 annual gift tax exemption per donee, you must file a federal gift tax return. But no federal gift tax will be due if you have not given away more than $1 million in non-exempt lifetime gifts. Purchase Bob Bruss reports online. However, you will be creating a capital gain tax problem for your donee. The reason is the donee takes over the donor's adjusted cost basis, which, in your situation, is extremely low since you have been deducting rental property depreciation. Unless there is a compelling reason to give away your property now, your adult child will be much better off taxwise inheriting the...