Tax Implications of Gifting Real Estate to Family Members | Ryan C. Young | Richmond, Virginia | Real Estate Attorney
Ryan C. Young - Real Estate Lawyer
Ryan C. Young – Real Estate Lawyer


Are you aware of the IRS national hunt for gift tax evaders? A generous gift of real estate is a primary target. Recently the IRS asked federal court to order a California tax agency to deliver its computer records for all residents who transferred real estate to their relatives for under-market consideration from 2005 to 2010.

As every real estate attorney knows, a gift of real estate must be managed properly to avoid (not evade) federal gift tax consequences. Should you make a gift of real estate to evade taxation, you may be subject to unwelcome IRS audits, along with monetary penalties and/or back taxes.

The IRS, as part of its Estate and Gift Tax Program, admits to going on a “fishing expedition.” However, the agency believes there is widespread non-compliance from information it has already captured from 15 other states. An IRS official estimates between “60 percent and 90 percent of taxpayers” transfer property and do not file the required gift tax Form 709.

If you have made a gift of real estate for little or no consideration to family, consult an experienced real estate attorney to learn about federal gift tax regulations involving real property. IRS is targeting these transfers after finding that samples of such transfers in Ohio indicated gift tax forms were never filed and in Florida and Virginia only 10 percent of the required forms were filed.

California government officials originally balked at a voluntary release of property transfers, citing state privacy laws. Not to be thwarted, the IRS then filed their federal lawsuit, requesting the court to mandate transfer of the real estate records.

Federal gift tax requirements are often overlooked by taxpayers. One reason could be the tax rate, a distressing 35 percent. With the lifetime limit of such transfers increased from $1 million to $5 million in 2011, the IRS asked for no records from the 2011 tax year from California. The Board of Tax Equalization (BOE) maintains the information for these real estate transfers, including names, social security numbers of grantors, dates, property descriptions and assessed real estate values.

The IRS strategy involves comparing database names with taxpayers who filed federal Form 709, reporting a gift of real estate. Those taxpayers not on the list may generate unwelcome attention from this federal agency.

If you have questions about how to avoid gift taxes while making a transfer of property, give me a call today to schedule a consultation.  There are planning options which allow you to avoid the tax.

IRS Circular 230 Disclosure:

To ensure compliance with requirements imposed by the IRS, any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used by the recipient or any other taxpayer, (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer under the Internal Revenue Code or applicable state or local tax law provision or (ii) in promoting, marketing or recommending to another party any transaction, arrangement or matter addressed herein.

Law Office of Ryan C. Young, PLLC | Richmond, Virginia

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