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Author: wbranson Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121095  
Subject: Question for Roy (TMF Taxes) Date: 1/31/2000 10:20 PM
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In response to my question, you wrote:

"Please don't get TOO impatient. Most of the pros here visit during their spare time...and there isn't much of that to go around this time of year. So we'll all try to do the best that we can when we can.

<<Mr. X has a house worth $200,000. He puts his son, Little X, on the deed. I understand that a $100,000 taxable gift has taken place. I believe that a federal gift tax return must be filed, and $90,000 of the unified credit (the amount in excess of the $10,000 annual exclusion) has been used up.>>

Basically correct.

<<5 years later, Mr. X dies. The house has grown to a value of $300,000. Is the entire $300,000 subject to estate tax, so the total value of the house that has been subject to estate and gift tax is $390,000?. Or is there a $90,000 deduction from the taxable estate, so that only $210,000 is subject to estate tax?>>

Since the gift was vaild and complete (and reported), only half of the $300k would be required to be included in the decedent's estate tax return. So $150k of the exemption would be used up at death, in addition to the $90k that was used up when the gift was made."

First, I apologize if i seemed impatient. I certainly appreciate your help.

Your answer makes perfect sense. But the reason I am confused is a post on the same subject made by attorney Riser that read in part:

"Yes, generally, a taxable gift will have taken place if a parent furnished all of the consideration for the real property and transfers title to the parent and child as joint tenants with right of survivorship.

And, yes, the entire value of the house would still be part of the parent's taxable estate because the child did not contribute to the purchase or the improvements. It actually does mkae sense because what's being taxed either by gift tax or estate tax (it's a "unified" system) is 1) the value of the gift at the time of the gift, plus 2) the value of the parent's interest at death, plus 3) all of the appreciation, which, after you add it all up, is the total value of the property at death."

So this leaves me confused as to whether the entire value of the property is part of the taxable estate, as attorney Riser seems to say, or only the parent's 1/2, as you seem to say. Also, is all of the appreciation taxed at time of the parent's death, as attorney Riser seems to say, or only the appreciation on the parent's portion, as I understand you to say.

Again, I certainly appreciate any help you can provide.

Walter Branson
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