Tax Rules for Family Monetary Gifts
We’ve all been there — a sibling, an aunt, or a cousin, may need to transfer funds to your account for some reason – what are the tax consequences of such a transaction?
Inheritance situation – one family member receives funds and wants to transfer to you.
|Our Dad passed away 3 years ago and now his house was just sold. I have now received a payment. I understand that the payment is not taxable. Please let me know if that is not the case.
My brother is asking if he can send his payment of ±18,000 into my US banking account. What implications are there if I receive such a payment that is not intended for me?
Firstly – let’s address the question of the house and if there will be any tax on the sale. 3 years ago when your father unfortunately passed, let’s say the house was worth $100k. If you sell the house now for 100k, you would not pay any tax. However, if you sold the house for $500k, you would have $400k of capital gains; ie your cost basis becomes the price of the home at the time of the receipt from your deceased father. Note – if several people inherited the property (as it appears they have), each would report the sale of the home on their respective tax returns and report his/her share of proceeds/capital gain. Note that sale of inherited real estate must be reported regardless of whether there was gain or loss. Gain would be taxable; loss will be disregarded if house was not used for rental business.
Now – as far as the 18k transfer from one U.S citizen to another. If your brother is married then $18K may be treated as a joint gift from a married couple. In such case they do not have to report it because each spouse can make an annual gift to anyone up to $14K without reporting (ie – 18k is less than the 28k combined gift threshold for reporting by a married couple filing joint return)
If he is single, or his spouse has already made a gift that year to someone else, he may transfer $14K to you this year and $4K next year – also without filing the gift tax return.
Whole Story at TFX.