[WSBARP] Capital gain tax on gift of equity

[Kary Krismer]

I don't know how you make a gift of $20k of equity.  It needs to be a 
percentage ownership in the property to be understandable if not 
enforceable.  I presume the percentage would equal approximately $20,000 
in value.

As others have explained, there's ordinarily no income tax due but the 
grantee's basis would be the same as the grantor's basis.

So if Grantor had a piece of property worth $200,000 that they paid 
$100,000 for, the grantor would grant a 10% interest in the property 
(worth $20,000) and the grantee's basis would be $10,000.  If they later 
sold for $25,000 they would have a $15,000 gain.

Not sure exactly how it would work if the property were encumbered.  
Let's assume a $1,000,000 piece of property that the grantor paid 
$500,000 for and owes $800,000, so that a 10% gift would still be worth 
$20,000.  But the grantor's basis in that 10% would seemingly be worth 
$50,000.  That makes less sense, because it would get around the gift 
tax reporting limitations, and would cause me to contact a tax attorney.

Kary L. Krismer
206 723-2148

On 4/20/2021 4:56 PM, Craig Blackmon wrote:
> 'Mates, seller gifts $20k in equity to buyer. Does the seller owe 
> capital gains tax on that $20k?
>
> Thanks for any insight you can provide.
>
> Craig
> Craig Blackmon, Attorney at Law 
> <https://www.mywsba.org/PersonifyEbusiness/LegalDirectory/LegalProfile.aspx?Usr_ID=000000029240>
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> On the blog: How to Read (and Understand) a Title Report 
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