Tax Implications of Land Gifted to Child
Tax Implications of Land Gifted to Child
I have some land that my wife and I would like to gift to our grown child. We purchased over 25 years ago for $35k. Property tax valuation now is $75k. I know that in 2024 the gift tax limit is $18k for both my wife and I for total of $36k. We would like to do this transaction taking the gift tax limit over two to three years so she receives the land at fair market value as required by the IRS. My question is twofold: 1. Can I amortize this gift over several years? Or 2. Do I need to just claim it all in 2025 ($75k) and file a form 709 against our lifetime gift exemptions? Or 3. Can I just gift to her for the documented cost basis of $35k without tax implications for either of us?
Re: Tax Implications of Land Gifted to Child
For clarity, there are no "tax implications" either way, assuming your estate will be below the federal (and if applicable state) estate tax exemption. Currently, the federal rate is just shy of $28M for a married couple. Most people are going to have estates that will never be subject to estate taxes...
The only "implication" is an extra tax-form, recording the amount of the gift since it exceeded the annual limit (below which you don't need the form), thus reducing your future estate limit, which will still be close to $28M (assuming current estate tax exemptions remain in effect).
For my two cents, file the form and keep everything else simple. No taxes will be owed either way.
The only "implication" is an extra tax-form, recording the amount of the gift since it exceeded the annual limit (below which you don't need the form), thus reducing your future estate limit, which will still be close to $28M (assuming current estate tax exemptions remain in effect).
For my two cents, file the form and keep everything else simple. No taxes will be owed either way.
Last edited by SnowBog on Fri Jan 31, 2025 4:20 pm, edited 1 time in total.
Re: Tax Implications of Land Gifted to Child
In many areas the property tax valuation has little to do with the market price value either because it is out of date or is calculated using some complex formula.
Before you decide anything you need to get a good idea of what the actual market value is and likely get an appraisal somewhere in the process.
I am not a tax guru and have never done it but you could also look into doing an incremental gife where you give your kid 1/4th of the ownership each year for four years if that would make any difference. I would suspect that unless you are pretty wealthy the only thing it would save would be filing out a tax form.
Re: Tax Implications of Land Gifted to Child
There is the gift tax form question and you have some good responses. It is not clear to me that you understand that your child's cost basis (for capital gains calculation upon later sale) will be your cost basis of $35k. (I say this because you write "she receives the land at fair market value as required by the IRS". Gift tax forms are for you; she doesn't have any tax implications for that value.)
The fair market value on the date of the gift has nothing to do with the cost basis associated with a gift.
(You might want to provide your child with documentation of your cost basis, so they have it on hand when a later sale takes place.)
The fair market value on the date of the gift has nothing to do with the cost basis associated with a gift.
(You might want to provide your child with documentation of your cost basis, so they have it on hand when a later sale takes place.)
Last edited by Geologist on Fri Jan 31, 2025 1:08 pm, edited 1 time in total.
Re: Tax Implications of Land Gifted to Child
You of course will have to pay tax on your gain.
Re: Tax Implications of Land Gifted to Child
The gift value of the land is based on the current market value of the land, which may not be related to the assessed value of the land whatsoever. In states, like California, a property with an assessed value of $75K could be worth $1M+ in market value due to the way local state property assessment regulations. It is the current market value of the gift that counts for completion of IRS forms and potential gift taxes.mayoman wrote: Fri Jan 31, 2025 12:41 pm ...We purchased over 25 years ago for $35k. Property tax valuation now is $75k...
The closest helping hand is at the end of your own arm.
Re: Tax Implications of Land Gifted to Child
The OP will not realize any capital gain when they give the land to their child and thus there are no taxes to be paid by anyone because of this gift.
Re: Tax Implications of Land Gifted to Child
If you aren’t worried about your lifetime exemption it is probably easier to do it all at once as opposed to gifting fractional shares/ownership over multiple years.
Have the land appraised, transfer deed, file 709 for year of gift.
Your daughter will retain your original basis in the land if she were to sell it.
Have the land appraised, transfer deed, file 709 for year of gift.
Your daughter will retain your original basis in the land if she were to sell it.
Re: Tax Implications of Land Gifted to Child
I was gifted family land by my great aunt when I was less than 10 - deed referred to me as an "infant son". This land (woods and small fields) has been in the family since the 1880s - passed from one person to another. When I go, it will TOD to a trust in support of my two kids. Once they get control, if they decide for one sibling to buy out the other, would capital gains taxes be due then for that value? I'm assuming yes. The only record of the original sale price that I know of is the nominal amount that is listed in the deed. Essentially, 99% of the sale price will be a gain. If this is all true, would it be better to discuss with them who would want it when they get older, and change the TOD to give to only one child?
Re: Tax Implications of Land Gifted to Child
Your cost basis is the same as your Great Aunt - since she gave it to you. However, when you die, your children will inherit the property and the brand new cost basis will be the value as of your death. Advise them to get an appraisal or two, to document the fair market value. High is better for taxes, low is better if one wants to buy out the other.WVRick wrote: Fri Jan 31, 2025 4:49 pm ...When I go, it will TOD to a trust in support of my two kids. Once they get control, if they decide for one sibling to buy out the other, would capital gains taxes be due then for that value? I'm assuming yes.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.
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Re: Tax Implications of Land Gifted to Child
OP do you understand the difference between carryover basis for gifts versus the date of death value basis for assets held until death? Nothing is stopping your child from using the land now if that is the intent, or from you selling the land (perhaps at a lower capital gains rate) and giving dollars (perhaps within the annual tax exclusion) if that is the intent. In some states gifts of land could also possibly cause property tax repercussions, such as a new valuation or having to file a new agricultural/timber use application.
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Re: Tax Implications of Land Gifted to Child
Repeating what others have posted but in a bit more detail.
Almost everything you own and use for personal or investment purposes is a capital asset. Examples of capital assets include a home, personal-use items like household furnishings, and stocks or bonds held as investments. When you sell a capital asset, the difference between the adjusted basis in the asset and the amount you realized from the sale is a capital gain or a capital loss. Generally, an asset's basis is its cost to the owner, but if you received the asset as a gift or inheritance there are some special rules. You have a capital gain if you sell the asset for more than your adjusted basis. You have a capital loss if you sell the asset for less than your adjusted basis.
Since there is no sale of the land there is no capital gain that has been realized and subject to taxes.
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Re: Tax Implications of Land Gifted to Child
You can sell the land to the child, using interest only seller financing at current IRS rate for family loan. Then gift the property/ forgive the loan over several years. This will not use up any estate tax exemption, if that is your issue.
Re: Tax Implications of Land Gifted to Child
Ok spoke to a tax attorney (took only 15 minutes so didn’t cost a lot) and this is the advice which coincides with the majority of suggestions, so thank you. Since the gifted land is both in my wife’s and my name, we will each file a form 709 with the IRS each claiming our $18,000 limit for 2024 ($36k total). We are in the process of getting a formal appraisal of the land which should fall between $80-90k. This will be detailed on the 709. We will be applying the “taxable” portion remaining ( fair market value - $36k yearly exemption) against our lifetime exemption. Our estate has little to no chance of reaching $25 million lifetime exemption unless we won the lottery. As far as capital gains, there is no plans for her to sell the land during our remaining lifetime, so there are no gains. When we’re gone, she can do what she wants. We could do some creative things in gifting in pieces over several years to stay at or below the exemption yearly but it would be cumbersome and risks her not having clear title if she decides to improve the land.
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Re: Tax Implications of Land Gifted to Child
This is a weird comment. If you gift her the land, your lifetime is irrelevant. She will owe capital gains when she sells regardless of whether or not you are alive, and her basis is still $35k.mayoman wrote: Sat Feb 01, 2025 7:25 pm As far as capital gains, there is no plans for her to sell the land during our remaining lifetime, so there are no gains.
(That being said, if she builds a house on the land, that would add to the basis, and if she lives in that house as a primary residence, she could get an exclusion when she sells which could zero out the capital gains on the land.)
Re: Tax Implications of Land Gifted to Child
Note that unless Congress extends it, that exemption of 27.2 million reverts back to like 5 million at the end of this year.mayoman wrote: Sat Feb 01, 2025 7:25 pm Ok spoke to a tax attorney (took only 15 minutes so didn’t cost a lot) and this is the advice which coincides with the majority of suggestions, so thank you. Since the gifted land is both in my wife’s and my name, we will each file a form 709 with the IRS each claiming our $18,000 limit for 2024 ($36k total). We are in the process of getting a formal appraisal of the land which should fall between $80-90k. This will be detailed on the 709. We will be applying the “taxable” portion remaining ( fair market value - $36k yearly exemption) against our lifetime exemption. Our estate has little to no chance of reaching $25 million lifetime exemption unless we won the lottery. As far as capital gains, there is no plans for her to sell the land during our remaining lifetime, so there are no gains. When we’re gone, she can do what she wants. We could do some creative things in gifting in pieces over several years to stay at or below the exemption yearly but it would be cumbersome and risks her not having clear title if she decides to improve the land.
Re: Tax Implications of Land Gifted to Child
Great catch that under current law, they are set to revert to prior levels.User98065 wrote: Sun Feb 02, 2025 1:13 amNote that unless Congress extends it, that exemption of 27.2 million reverts back to like 5 million at the end of this year.mayoman wrote: Sat Feb 01, 2025 7:25 pm Ok spoke to a tax attorney (took only 15 minutes so didn’t cost a lot) and this is the advice which coincides with the majority of suggestions, so thank you. Since the gifted land is both in my wife’s and my name, we will each file a form 709 with the IRS each claiming our $18,000 limit for 2024 ($36k total). We are in the process of getting a formal appraisal of the land which should fall between $80-90k. This will be detailed on the 709. We will be applying the “taxable” portion remaining ( fair market value - $36k yearly exemption) against our lifetime exemption. Our estate has little to no chance of reaching $25 million lifetime exemption unless we won the lottery. As far as capital gains, there is no plans for her to sell the land during our remaining lifetime, so there are no gains. When we’re gone, she can do what she wants. We could do some creative things in gifting in pieces over several years to stay at or below the exemption yearly but it would be cumbersome and risks her not having clear title if she decides to improve the land.
Believe it's $5M per person, before adjusted for inflation... Which would be something like $10M - $15M for a married couple. Which is still likely more than most people will deal with.
Re: Tax Implications of Land Gifted to Child
Does she intend to build/live on the land during your lifetimes? If not, here's another option to consider: Give her rights to use the land now. There are several ways to do this, including a very long term lease (longer than your lifetime). Bequeath the land to her in your wills. She will inherit the land with a basis that is the value of the land when she inherits it. And you, rather than her, will get to pay the property taxes on the land for the rest of your lives.mayoman wrote: Sat Feb 01, 2025 7:25 pm As far as capital gains, there is no plans for her to sell the land during our remaining lifetime, so there are no gains. When we’re gone, she can do what she wants.

--vtMaps
"Truly, whoever can make you believe absurdities can make you commit atrocities" --Voltaire, as translated by Norman Lewis Torrey
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Re: Tax Implications of Land Gifted to Child
What I have been doing with the “Family Cabin” is gifting it in parts over years, 1 year left to go, retaining a life estate. The retention of the life estate means that the basis will be stepped up at death. At least it used to, I don’t know if that rule has been changed. As the life tenant I am legally responsible for paying taxes, insuring, and maintaining the property. So when the well “broke” I paid for fixing the well.
When calculating the value of the gift you need to subtract the value of the life estate from value of the property.
The state where the cabin is located, by law, requires that real estate be appraised and valued at fair market value, so I am comfortable with using the county appraiser’s value. Plus, I leave in a fudge factor. I was always concerned that if you use the max value, $18000, and then send a birthday check for $500, that you would trigger a whole bunch of problems.
I visit the cabin for a month each summer and let my son and family use it the rest of the year.
It works for us.
When calculating the value of the gift you need to subtract the value of the life estate from value of the property.
The state where the cabin is located, by law, requires that real estate be appraised and valued at fair market value, so I am comfortable with using the county appraiser’s value. Plus, I leave in a fudge factor. I was always concerned that if you use the max value, $18000, and then send a birthday check for $500, that you would trigger a whole bunch of problems.
I visit the cabin for a month each summer and let my son and family use it the rest of the year.
It works for us.
The market goes up, the market goes down.
Re: Tax Implications of Land Gifted to Child
For gift tax purposes, if you give the remainder and retain a life estate, the life estate is disregarded. It's treated as a gift of the entire property. Internal Revenue Code Section 2702: https://www.law.cornell.edu/uscode/text/26/2702. See in particular Section 2702(c)(3)(A).Sagenick48 wrote: Sun Feb 02, 2025 6:19 am What I have been doing with the “Family Cabin” is gifting it in parts over years, 1 year left to go, retaining a life estate. ...
When calculating the value of the gift you need to subtract the value of the life estate from value of the property.
...
However, you won't be taxed twice. While the entire value of the property will be included in your estate for estate tax purposes, the value of the gift won't count against your estate tax exclusion amount.
Re: Tax Implications of Land Gifted to Child
Estates of decedents who die during 2025 have a basic exclusion amount of $13.99 million or $27.98 million for a married couple. The pre TCJA limit was $5.49 million in 2017 and was subject to inflation adjustment. Depending on what you assume for inflation in 2025 the limit under the pre TCJA law will be $7 to $7.5 million or $14 to $15 million for a couple.User98065 wrote: Sun Feb 02, 2025 1:13 amNote that unless Congress extends it, that exemption of 27.2 million reverts back to like 5 million at the end of this year.mayoman wrote: Sat Feb 01, 2025 7:25 pm Ok spoke to a tax attorney (took only 15 minutes so didn’t cost a lot) and this is the advice which coincides with the majority of suggestions, so thank you. Since the gifted land is both in my wife’s and my name, we will each file a form 709 with the IRS each claiming our $18,000 limit for 2024 ($36k total). We are in the process of getting a formal appraisal of the land which should fall between $80-90k. This will be detailed on the 709. We will be applying the “taxable” portion remaining ( fair market value - $36k yearly exemption) against our lifetime exemption. Our estate has little to no chance of reaching $25 million lifetime exemption unless we won the lottery. As far as capital gains, there is no plans for her to sell the land during our remaining lifetime, so there are no gains. When we’re gone, she can do what she wants. We could do some creative things in gifting in pieces over several years to stay at or below the exemption yearly but it would be cumbersome and risks her not having clear title if she decides to improve the land.
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Re: Tax Implications of Land Gifted to Child
Two points regarding the statements above.mayoman wrote: Sat Feb 01, 2025 7:25 pm As far as capital gains, there is no plans for her to sell the land during our remaining lifetime, so there are no gains. When we’re gone, she can do what she wants.
First, if there are no plans to sell the land during your remaining lifetime, then why gift it in the first place? If you just keep it in your names, on your passing, she would get a step up in basis which would be advantageous if and when she does sell.
Second, if there something enforcing the fact that she won't sell it during your lifetime? If you gift it to her, it's hers. Technically, she could decide to sell it the next day.
Re: Tax Implications of Land Gifted to Child
The land is for home building after a divorce. She’s exploring that now. Yes, she could decide to sell, but she won’t per our family agreement. I am proud to say, we’ve raised two great kids who are financially stable and have never gone back on a promise to us.humblecoder wrote: Sun Feb 02, 2025 9:08 amTwo points regarding the statements above.mayoman wrote: Sat Feb 01, 2025 7:25 pm As far as capital gains, there is no plans for her to sell the land during our remaining lifetime, so there are no gains. When we’re gone, she can do what she wants.
First, if there are no plans to sell the land during your remaining lifetime, then why gift it in the first place? If you just keep it in your names, on your passing, she would get a step up in basis which would be advantageous if and when she does sell.
Second, if there something enforcing the fact that she won't sell it during your lifetime? If you gift it to her, it's hers. Technically, she could decide to sell it the next day.
Re: Tax Implications of Land Gifted to Child
Not trying to call you out but it seems a little selfish to gift a child land with the condition they don’t sell it for the rest of your natural life. What if they have a job opportunity somewhere else? What if their future spouse has a job opportunity somewhere else? What if after building on it they realize this isn’t the property/house they want/need? How are they supposed to live their life and have responsible financial options when they’re tied to this property for decades?The land is for home building after a divorce. She’s exploring that now. Yes, she could decide to sell, but she won’t per our family agreement. I am proud to say, we’ve raised two great kids who are financially stable and have never gone back on a promise to us.
Re: Tax Implications of Land Gifted to Child
No offense taken. Guess I’m not being clear. The land is gifted strictly to provide her a lot to build upon. IF she builds then all stipulations are off of our agreement. If she had to move or whatever then she can do as she wishes with the property. It was only if there were NO improvements or building on the lot that we agreed she would not sell until we passed. We bought the lot (connected with our present home location) to maintain our view of the mountains where we live. We have enjoyed that view for 25 years but are quite willing to sacrifice it for one of our children in need but not for someone else to build on. Of note where we live in the U.S. land and housing has more than tripled in the last few years especially in our county. Hope that clarifies a bit.HoneyDew wrote: Sun Feb 02, 2025 9:04 pmNot trying to call you out but it seems a little selfish to gift a child land with the condition they don’t sell it for the rest of your natural life. What if they have a job opportunity somewhere else? What if their future spouse has a job opportunity somewhere else? What if after building on it they realize this isn’t the property/house they want/need? How are they supposed to live their life and have responsible financial options when they’re tied to this property for decades?The land is for home building after a divorce. She’s exploring that now. Yes, she could decide to sell, but she won’t per our family agreement. I am proud to say, we’ve raised two great kids who are financially stable and have never gone back on a promise to us.
Re: Tax Implications of Land Gifted to Child
No offense taken. Guess I’m not being clear. The land is gifted strictly to provide her a lot to build upon. IF she builds then all stipulations are off of our agreement. If she had to move or whatever then she can do as she wishes with the property. It was only if there were NO improvements or building on the lot that we agreed she would not sell until we passed. We bought the lot (connected with our present home location) to maintain our view of the mountains where we live. We have enjoyed that view for 25 years but are quite willing to sacrifice it for one of our children in need but not for someone else to build on. Of note where we live in the U.S. land and housing has more than tripled in the last few years especially in our county. Hope that clarifies a bit.
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I appreciate you clarifying the agreement. Under those conditions it’s a much more reasonable and understandable request.
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I appreciate you clarifying the agreement. Under those conditions it’s a much more reasonable and understandable request.
Re: Tax Implications of Land Gifted to Child
No Sale involved. Child has same basis as parent. When child sells child pays tax on gain based upon the original basis. So the tax on today value less basis is deferred until child sells.
If property was sold, that tax is paid now but the buyer gets a basis of current cost.
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Re: Tax Implications of Land Gifted to Child
If OP has any space in the 0% cap gains rate bracket, he and wife could sell daughter the lot (using installment sale if needed) and subsequently gift daughter money (or principal/interest on installment note). Would get daughter a new basis and could avoid the 709. Downside is OP has interest income at AFR rate if a note is used.
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Re: Tax Implications of Land Gifted to Child
Then my first point stands. If you gift it to her now, then she doesn't benefit from the step up in basis on your passing. That could cost her quite a bit in taxes depending on the land's value.mayoman wrote: Sun Feb 02, 2025 7:25 pmThe land is for home building after a divorce. She’s exploring that now. Yes, she could decide to sell, but she won’t per our family agreement. I am proud to say, we’ve raised two great kids who are financially stable and have never gone back on a promise to us.humblecoder wrote: Sun Feb 02, 2025 9:08 am
Two points regarding the statements above.
First, if there are no plans to sell the land during your remaining lifetime, then why gift it in the first place? If you just keep it in your names, on your passing, she would get a step up in basis which would be advantageous if and when she does sell.
Second, if there something enforcing the fact that she won't sell it during your lifetime? If you gift it to her, it's hers. Technically, she could decide to sell it the next day.
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Re: Tax Implications of Land Gifted to Child
Yeah, I'd love to know the market value of the land.humblecoder wrote: Wed Feb 05, 2025 7:14 amThen my first point stands. If you gift it to her now, then she doesn't benefit from the step up in basis on your passing. That could cost her quite a bit in taxes depending on the land's value.mayoman wrote: Sun Feb 02, 2025 7:25 pm
The land is for home building after a divorce. She’s exploring that now. Yes, she could decide to sell, but she won’t per our family agreement. I am proud to say, we’ve raised two great kids who are financially stable and have never gone back on a promise to us.