Gift Taxes from Real Estate and New IRS Rules on CashApp

2022-02-08

Are you going to inherit a house from your parents? Also, how will the new IRS rule on third-party payer apps, such as Venmo and Zelle, affect a landlord to collect rental payments? Beware of gift taxes from real estate, 1099-K and 709 forms, and other tax implications. In this episode of Tax Tuesday, Toby Mathis and Jeff Webb of Anderson Advisors discuss gift taxes from real estate and new IRS rules on CashApp as well as answer additional tax-related questions. Submit your tax question to...

In this episode of Tax Tuesday, Toby Mathis and Jeff Webb of Anderson Advisors discuss gift taxes from real estate and new IRS rules on CashApp as well as answer additional tax-related questions. Submit your tax question to taxtuesday@andersonadvisors.

Highlights/Topics:

I am from Dallas, Texas. My parents have a primary home and rental house. They want to give me their rental house, but they owe $42,000 to the mortgage company. What’s the best way to inherit the house, how do I deal with the gift tax, what tax implications do I need to be aware of, and how can I avoid the taxes if possible? If you are gifted an encumbered property, it decreases the gift amount. Take over the loan, or if you are not able to pay off the loan and the parents continue to pay it, then that would be considered a gift. Otherwise, do nothing.
Can one circumvent the $16,000 maximum yearly gift tax exclusion by giving $16,000 to multiple persons who in turn also give $16,000 to the same single final recipient? No, you can't do this step transaction, a collapsible transaction. The IRS looks at what happened from the beginning to the end and will find that you actually made that gift yourself to that single recipient.
How will the new IRS rule on third-party payer apps, such as Venmo, Zelle, etc., affect a landlord to collect rental payments via a phone number or email linked to one bank account. The landlord will get a 1099-K for payments received, which is personal income, but taxable revenues are split amongst rental entities. What’s the best way to handle this? If all the properties are in your name, it will not make any difference. If you have one party collecting for yourself, partnership, or S Corp, then it can create an issue.

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Resources:

Form 1099-K

https://www.irs.gov/businesses/understanding-your-form-1099-k

Form 709

https://www.irs.gov/forms-pubs/about-form-709

Unrelated Business Income Tax (UBIT)

https://www.irs.gov/charities-non-profits/unrelated-business-income-tax

Unrelated Debt Financing Income (UDFI)

https://www.irs.gov/charities-non-profits/unrelated-business-income-from-debt-financed-property-under-irc-section-514

Toby Mathis