Question

Where do I report the disposition of rental property if gifted to son?

Forum|Forum|3 years ago
April 5, 2023
1 reply
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I am using Turbo Tax Premier.

I gifted a rental property to my son in November 2022.

When asked if SOLD or dispositionsed this in 2022. Turbo Tax instructs to state NO if SOLD or dispositioned to a relative.

I don't see where the loop gets closed. Please advise.

I am completing a Gift Tax Form 709 that will be mailed in separately from my return, but seems something is missing.

Ask the Experts - Refund - April 2023

C

Cynthiad66

Nothing is missing. You seem to be on track. This gift is not a taxable transaction for you.

You don't need to report the gift of a rental property on your income tax return because there wasn't a taxable event (i.e. gain or loss on sale or disposition). You just need to report it on Form 709 United States Gift (and Generation-Skipping Transfer) Tax Return).

Actually, you did everything right. On the asset entry worksheets, in the disposal section, just enter the date it was disposed (gifted), with no sales price, that will remove it from the return as of that date with no "sale".

Be sure to printout the Depreciation schedule for your son, he will need that to setup the rental on his return.

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K

KHoskinsAuthor

Thank you Cynthia.

When I go to the line 20 of the asset entry worksheet line 20 and enter date dispositioned (11/22/22) and on line 21, I enter zero for sales price, it shows a large loss on lines 35 and 36.

Form 4797; Sale of Business Property, Part 1, automatically fills and shows a loss.

I should NOT be taking loss. My son will live in gifted property as his primary residence. If he sells after owning and living there for 2 plus years, he will take gains from my adjusted cost basis.

I just can’t make Turbo tax input correctly.

D

DianeW777

Here's how to make it correct for your situation. Follow the instructions next for TurboTax to treat it appropriately on your tax return.

When you are in the rental property you must indicate you converted it to personal use and enter the date. This will eliminate depreciation on the rental property as of the date of conversion which will be the date you gifted it to your son, This will also eliminate the sale on Form 4797, which did not occur.

Since you gifted this to your son, the cost basis in your hands will be the same in his hands as well (cost less depreciation for both the building and any other assets that belong to it). As indicated by @Cynthiad66, a gift tax return is required to be prepared if the gift is greater than $16,000. This will be very important for your son.