Taxes on donations to me?

[jmoore]

I have been presented with a potential scenario where a home builder might be willing to donate a substantial amount of work on our house to make it handicap accessible for our youngest son. This is a very generous offer as it could be a large sum of money.

What potential tax implications could this have on me? I know there are appraisal and property tax issues to contend with after the refurb. But could this donation be considered income tax or something similar? I know the owners of those Extreme Makeover houses can have some subsequent tax issues on their houses.

To be clear, I'm not asking for professional advice. I've reached out to a tax professional to help. I'm just trying to get a feel for the potential impacts of accepting a gift like this so I am not surprised at some point in the future.

[Jaq]

I think you have to pay taxes on the amount that his donation would be worth. So if the bid for the same job elsewhere were ordinarily say, 5,000 dollars, you'd be expected to pay tax on that amount, as he's essentially "giving" you five grand.

[Len J]

I think you have to pay taxes on the amount that his donation would be worth. So if the bid for the same job elsewhere were ordinarily say, 5,000 dollars, you'd be expected to pay tax on that amount, as he's essentially "giving" you five grand.


http://fairmark.com/general-taxation/tax-rules-for-gifts/

[alembical]

I am not a CPA but would think that it would not be taxable. It is not income, and gifts are only treated as a tax issue for the giver. But am curious to hear the answer.

Definitely not an income tax issue. Definitely not a gift tax issue. Not sure what tax you would have to pay if you had to pay one.

[SamIAm]

I think you have to pay taxes on the amount that his donation would be worth. So if the bid for the same job elsewhere were ordinarily say, 5,000 dollars, you'd be expected to pay tax on that amount, as he's essentially "giving" you five grand.

I think it probably depends on the amount and the manner he handles the transaction in his books.

I think anyone, at lease on a personal level, not sure about a business is allowed to gift another up to 10,000 (maybe more these days) with no tax consequence.

If you are married, he can gift you 10,000, your wife 10,000, your children 10,000 etc.

But if he handles it through the business, that may change things.

[alembical]

gifts over the $13,000 a year (from any person to any person) go towards the donors lifetime exemption amount, but still would have not tax issues for the recipient

[jmoore]

http://fairmark.com/general-taxation/tax-rules-for-gifts/

Thanks for this Len. I read this before but didn't read it closely enough.

This appears to say that I'm not liable for anything other than property tax valuation increases after the work is done. I'll run this by a tax pro and see what they say, but it's good info.

And FWIW, we are talking about a big amount of $$ here. Mid-to-high five figures worth of time and materials.

[MattTuck]

Thanks for this Len. I read this before but didn't read it closely enough.

This appears to say that I'm not liable for anything other than property tax valuation increases after the work is done. I'll run this by a tax pro and see what they say, but it's good info.

And FWIW, we are talking about a big amount of $$ here. Mid-to-high five figures worth of time and materials.

Don't let a property assessor come into your house. Your local laws may vary, but in most places they're like vampires. They can only come in if you invite them.

well, maybe not that clear cut, but I don't think they have any legal standing to enter your house without your consent.

[Len J]

Thanks for this Len. I read this before but didn't read it closely enough.

This appears to say that I'm not liable for anything other than property tax valuation increases after the work is done. I'll run this by a tax pro and see what they say, but it's good info.

And FWIW, we are talking about a big amount of $$ here. Mid-to-high five figures worth of time and materials.

Your pro will know. Generally, the IRS attampts to make sure that something is taxable to you only to the extent it's deductible to the organization providing it to you. The wild card here is that a.) you are not certain how he is treating it & b.) when it comes to tax law, it's not about logic but rather about the way the law is written and interpreted.

It's a great time to ask the questions you are asking and a really nice problem to have.

Let us know what you hear from the expert.

Len

[Jaq]

Is it a gift, though? I guess that's the thing. Maybe it is, but to me it seems like an indirect one at best; the fellow in question is still doing labor, using supplies bought from retailers and such.

And I wonder, can he claim it as a deduction on his tax forms? If so, wouldn't the IRS say "fine, we won't tax you on that amount, but we're gonna tax someone, because X amount of work was done."

Beats me. Interesting topic, though.

[54ny77]

i say don't do a damned thing and enjoy the gift.

if the builder/donor isn't expensing it (which would leave uncle sammy or local gubmint looking for their share, absurd as it is), then there by the grace of good fortune goes you & your family.

best of smiles and happiness to you & your family, regardless of how the tax thing plays out.

[Ken Robb]

Don't let a property assessor come into your house. Your local laws may vary, but in most places they're like vampires. They can only come in if you invite them.

well, maybe not that clear cut, but I don't think they have any legal standing to enter your house without your consent.

In my area property tax increases for remodeling are usually based on the stated value on one's application for a building permit. Not all prpojects get the "required" permits.

[jmoore]

It's a great time to ask the questions you are asking and a really nice problem to have.

It's a great problem to have for sure. We called the guy in to bid the master bathroom redo and he came back with this proposal. I'm totally blown away.


In my area property tax increases for remodeling are usually based on the stated value on one's application for a building permit. Not all prpojects get the "required" permits.

This will be totally above board with all proper permits, etc. I'm not into pushing the envelope on this type of stuff. At all.


i say don't do a damned thing and enjoy the gift.

if the builder/donor isn't expensing it (which would leave uncle sammy or local gubmint looking for their share, absurd as it is), then there by the grace of good fortune goes you & your family.

best of smiles and happiness to you & your family, regardless of how the tax thing plays out.

We will enjoy it for sure. It will make life much easier for our son to have to house accessible for him. The benefit to my wife and I is ancillary compared to how it will help him.

I'm sure the builder has done this type of thing before. He'll certainly have input into how the transaction goes down. He's highly respected so it will be done right.

[jlyon]

The TV show got around the tax issues by leasing the home from the people for a short period (7 days) so that income would not be taxable to the property owner (stange tax law about the number of rental days in a year the number may be 14). Then they would do leasehold improvements to the property and basically abandon them when they left in a week so that improvement was not taxable to the owner either.