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ACAPerson
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Gift Tax question
Tuesday, September 28 2010 09:55 PM
Hi, Mr. Hughes,
I am reading the basic course. On page 24, you said:
A gift tax MAY be imposed when you transfer property irrevocably into a land trust while you are still alive.
What is the real meaning here for 'irrevocably'? Could you give me some examples for the cases when gift tax is triggered? Any legal way to avoid gift tax when changing beneficiary?
Thanks
John
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Randy Hughes
Land Trust Expert-40+ years of experience
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Re:Gift Tax question
Thursday, September 30 2010 10:36 PM
John,
PLEASE SEE MY COMMENTS IN BOLD BELOW.
RANDY
I am reading the basic course. On page 24, you said:
A gift tax MAY be imposed when you transfer property irrevocably into a land trust while you are still alive.
What is the real meaning here for 'irrevocably'? Could you give me some examples for the cases when gift tax is triggered? Any legal way to avoid gift tax when changing beneficiary?
YES, AS AN EXAMPLE. IF YOU FORM A TRUST AND PLACE IN THE TRUST A PROPERTY YOU OWN THAT HAS SAY...50k OF EQUITY AND THEN YOU MAKE SOMEONE OTHER THAN YOURSELF THE BENEFICIARY, YOU WILL INCUR A GIFT TAX ON THE DIFFERENCE BETWEEN 13,000 (THE CURRENT IRS EXEMPTION AMOUNT) AND THE 50K (OR, 37,000). THIS IS LIKE HANDING SOMEONE 50k AND THE IRS SAYS THERE WILL BE A GIFT TAX AS A RESULT.
Randy Hughes
866-696-7347
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ACAPerson
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Re:Re:Gift Tax question
Thursday, September 30 2010 11:26 PM
Let us have following example:
In 2009, I change beneficiary from A to B.
In 2010, I change beneficiary from B back to A.
Does that mean A needs to pay gift tax in 2009 and B needs to pay gift tax in 2010? This seems paying too much gift tax. This makes changing beneficiary not real a good thing.
Do you have any comment on this?
Thanks
John
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Randy Hughes
Land Trust Expert-40+ years of experience
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Re:Re:Re:Gift Tax question
Friday, October 01 2010 11:00 AM
SEE MY COMMENTS IN BOLD
Let us have following example:
In 2009, I change beneficiary from A to B.
In 2010, I change beneficiary from B back to A.
Does that mean A needs to pay gift tax in 2009 and B needs to pay gift tax in 2010? This seems paying too much gift tax. This makes changing beneficiary not real a good thing.
TECHNICALLY I BELIEVE THE ANSWER IS YES (FOR ALL VALUE OVER 13,000), BUT TALK TO YOUR ACCOUNTANT. IT SEEMS TO ME THAT THERE MAY BE A TIMING ISSUE. SO, FOR EXAMPLE IF YOU MADE THE TRANSFER/GIFT IN DECEMBER OF 2009 AND THEN REVERSED IT IN 2010 PRIOR TO FILING 2009'S TAX RETURN YOU MAY "GET BY WITH IT." BUT, AGAIN IT IS A QUESTION FOR YOUR TAX ACCOUNTANT TO BE SURE.
Randy Hughes
866-696-7347
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ACAPerson
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Re:Re:Re:Re:Gift Tax question
Wednesday, November 10 2010 11:31 PM
Hi, Randy,
Two more questions:
1. On page 31 of advance course, you said: "If you use the LLC you should not have a tax problem as they are viewed as pass through entities by the IRS (if it is a single member LLC). If you have a multiple member LLC it will file a partnership tax return and report the net tax results to its members on a K-1."
Does that mean that there is no gift tax issue if I create a LLC as beneficiary and put myself and another person (who is not my wife) as LLC's member? I know that there will be gift tax issue if I put such person directly as 50% beneficiary.
2. Once I finish your course, I need to start creating land trust for my rental properties. One of my friend suggests having an expert to review our land trust paper work (the deed and agreement) to make sure all of statements are right. I am in California and will use Virginia land trust format. Do you offer such review service? If yes, how much do you charge for each land trust?
Thanks
John
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Randy Hughes
Land Trust Expert-40+ years of experience
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Re:Re:Re:Re:Re:Gift Tax question
Thursday, November 11 2010 09:38 AM
See my comments below in BOLD.
1. On page 31 of advance course, you said: "If you use the LLC you should not have a tax problem as they are viewed as pass through entities by the IRS (if it is a single member LLC). If you have a multiple member LLC it will file a partnership tax return and report the net tax results to its members on a K-1."
Does that mean that there is no gift tax issue if I create a LLC as beneficiary and put myself and another person (who is not my wife) as LLC's member? I know that there will be gift tax issue if I put such person directly as 50% beneficiary.CORRECT, THERE WOULD BE NO GIFT TAX RESULT TO YOU BUT THERE WOULD BE TO THE OTHER PERSON WHO WAS NOT PREVIOUSLY AN OWNER.
2. Once I finish your course, I need to start creating land trust for my rental properties. One of my friend suggests having an expert to review our land trust paper work (the deed and agreement) to make sure all of statements are right. I am in California and will use Virginia land trust format. Do you offer such review service? If yes, how much do you charge for each land trust?NO, I DO NOT BUT YOU WILL FIND IN THE ADVANCED TRUST COURSE GUIDE REFERRAL INFORMATION TO A VIRGINIA LAND TRUSTEE THAT CAN HELP YOU. HOWEVER, HE IS NOT AN ATTORNEY AND WILL NOT GIVE YOU LEGAL ADVICE. IF YOU NEED A KNOWLEDGEABLE ATTORNEY TO REVIEW YOUR TRUST DOCUMENTS, SEND ME AN EMAIL AND I WILL GIVE YOU OUR RECOMMENDATION FOR CALIFORNIA ADVICE. WE ALSO HAVE A LADY IN VA THAT WILL SERVE AS TRUSTEE, BUT SHE IS NOT AN ATTORNEY EITHER.
randy@realestateforprofit.com
Randy Hughes
866-696-7347
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