[WSBARP] Taking non resident alien spouse off title of real estate - tax issues

Tue Jan 12 21:42:03 PST 2021

What I meant by raising FIRPTA was whether the couple was contemplating 
a future sale and thinking by doing a QCD beforehand they could avoid 
FIRPTA.  I'm not sure that future sale would give rise to FIRPTA 
withholding, but again I'm not sure it wouldn't either.  But I wasn't 
worried about FIRPTA on the gift.

As to the step up in basis my concern was that the step up would only 
apply to community property, not separate property.  Also a question I 
don't know the answer to.  In the back of my mind I seem to recall it 
applies to either type of property, but that's something I'd want to 
make sure of.

Kary L. Krismer
206 723-2148

On 1/12/2021 7:29 PM, John J. Sullivan wrote:
> Good points.
>
> 1. No FIRPTA withholding on gifts. No gain realized.
>
> https://www.irs.gov/individuals/international-taxpayers/exceptions-from-firpta-withholding 
> <https://www.irs.gov/individuals/international-taxpayers/exceptions-from-firpta-withholding>
>
> 2. Yes. If NRA spouse died first there would be a step up in basis 
> even though estate not subject to estate tax.  Perhaps she transfers 
> her interest to a revocable trust for his benefit? Or somehow achieve 
> whatever the objective is while not removing it from her gross estate?
>
> https://hodgen.com/why-nonresident-decedents-get-step-up-basis-at-death/ 
> <https://hodgen.com/why-nonresident-decedents-get-step-up-basis-at-death/>
>
> Don’t forget to check any applicable treaty.
>
> John J. Sullivan
>
> Sent from my iPhone
>
>> On Jan 12, 2021, at 7:15 PM, Kary Krismer <Krismer at comcast.net> wrote:
>>
>> 
>>
>> I would take a step back, and if this is just about FIRPTA, find out 
>> if FIRPTA would even apply with a US Citizen still on title.  I sort 
>> of doubt it would since they would have a taxpayer to reach, but I 
>> don't know that.
>>
>> And then I would think about the step up in basis on death of 
>> community property when a spouse passes away, and find out whether 
>> you'd be giving that away.  Without this transfer and a step up in 
>> basis there'd likely be little or no gain for several years, and even 
>> if FIRPTA applied any money taken would be paid back upon filing a 
>> return. Note that step up in basis would apply whichever spouse dies 
>> first.
>>
>> It may be the client is wishing to avoid a non-existent problem and 
>> creating a future liability.
>>
>> Kary L. Krismer
>> 206 723-2148
>> On 1/12/2021 6:22 PM, John J. Sullivan wrote:
>>> If NRA wife gifts now to citizen husband, the unlimited marital 
>>> deduction applies.
>>>
>>> I would specify it’s to create separate property and claim that REET 
>>> exemption so if she dies her estate has no CP interest in US source 
>>> property.
>>>
>>> John J. Sullivan
>>>
>>> Sent from my iPhone
>>>
>>>> On Jan 12, 2021, at 3:42 PM, Lisa Chiang <feesimple7 at gmail.com> wrote:
>>>>
>>>> 
>>>> Hi all,
>>>>
>>>> A silly question, as it's been awhile since I've dealt with this 
>>>> scenario, so want to be sure:
>>>>
>>>> Client is U.S. citizen.  Wife used to hold a green card, which she 
>>>> gave up after they moved overseas a decade ago.  IRS deems her to 
>>>> be a non resident alien (NRA) for tax purposes.  Kids are also U.S. 
>>>> citizens (all minors currently).
>>>>
>>>> Real estate in WA state acquired as community property when they 
>>>> both lived and worked here.
>>>>
>>>> Client would like to take his wife off title of WA house (she's 
>>>> agreeable).
>>>>
>>>> *Wondering about gift tax issues before we proceed. (Will prepare 
>>>> QDOT for other liquid assets). Any thoughts or wisdom from the 
>>>> group is greatly appreciated.*
>>>>
>>>> Kind regards,
>>>> Lisa
>>>>
>>>>
>>>> -- 
>>>> /
>>>> /
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