1

I have a house that had fire damage.

I would like to give the property to a restoration company to avoid having to pay out the money in repairs.

Are there any tax implications if I give the property the company?

I'm in Ohio

  • What is the current value of the home/property that you would be gifting? – Ron Beyer Jul 26 '18 at 16:56
  • @RonBeyer Around $50k – Eric Jul 26 '18 at 16:58
  • 1
    You may be on the hook (yes, you, not the recipient) for up to $35,000 of taxable value, since it is above the IRS $15k tax limit. If the recipient improves the property and sells it, they will have to pay capital gains taxes. You could take the gift off of your "lifetime exclusion" but it will reduce the non-taxable value of your estate when you die. I didn't make this an answer because you are specifically asking about Ohio, and what I said applies to federal taxes. – Ron Beyer Jul 26 '18 at 17:03
  • Thank you. This at least gives me an idea of what I might be in for. – Eric Jul 26 '18 at 17:06
  • As for Ohio, there is no longer any clawback of gifts made within 3 years of death, so nothing of concern at the state level. – user6726 Jul 26 '18 at 18:51
1

I am not convinced that the transaction you describe is a gift or that this is a beneficial way for you to characterize the transaction. I think that it is more fair to characterize it as a sale of the property for some nominal amount of consideration (e.g. $1,000).

A transfer of property to an arms-length stranger is presumptively a sale for fair market value, and it would be hard to overcome that presumption in this case. So, the IRS would not tag you for having made a "bargain sale" in all likelihood and thus would not try to treat it as a gift.

You could then take a capital loss or casualty loss on the sale for tax purposes (although individual as opposed to business casualty losses were abolished in the 2017 tax legislation).

Also, was the property not insured? Usually fire losses would be covered by insurance. It sounds like you are either trying to pocket the insurance proceeds rather than rebuilding, or didn't have insurance for some reason.

Uninsured losses can be casualty losses, but if you receive proceeds of insurance which you keep and also sell it for, say $1,000, the combined amount is your sale price and the difference from the adjusted basis (i.e. purchase prices plus capital improvements less depreciation) is a capital gain, or depreciation recapture, or capital loss as the case may be.

| improve this answer | |

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.