Gifting Money from Sale of Homes / Capital Gains Tax
Hello! We are selling 2 rental properties in California that have been owned for more than 2 years by our Dad. He's been renting them to me and my brother. Our Dad wants to transfer ownership of these homes to us, but we plan to sell them and move to Missouri in the next 3-6 months. Our plan is to take the Capital Gains hit. We're assuming the 2 properties will sell for 550,000 and the cost of them (including closing costs) will probably be about 225,000. This will leave us with 325,000 that we'll owe capital gains on. Since our Dad has owned them for more than 1 year, it seems like it's better to have him pay Capital Gains Tax of about 48,750 (guessing his tax bracket is over 100k) out of the money he receives for the sale of the homes and then to gift us the remaining funds and to file a 709 Gift Tax Form. Then we can purchase the new home (the 2 of us brothers are going in on a property together) in Missouri with the funds he gifted to us. Questions: 1. Does that sound correct? 2. Is there a better way to do this? (Dad isn't interested in a 1031 exchange and to continue renting to us, he wants to transfer the value of these homes to us, so we can handle it moving forward) 3. If my Dad gifts us the money, will it impact our personal taxes? Or do gifts not count towards income? 4. What kind of support would you recommend for this plan? A CPA? Thank you for your time, Dylan
