How To Minimize Taxes/avoid Double Tax In This Situation?
Situation:
Family member has a property free and clear in their name they want to sell.
They are allowing me to sell it and only want about 45% of the sale for their self. then giving the remaining 55% to me for future investments.
lets say the property sells for 100,000 they would have to pay taxes on that, could anyone explain if and how we may minimize taxes and what is the best way to handle the portion that would be given to me so as not to pay taxes, like income, on that again?
i was thinking there might be a way for her to "gift" us either the property or the the portion of the sale but i have no idea how it would work.
any help would be greatly appreciated.
Kris[ Edited by krismallory on Date 06/12/2005 ]
You can use a limited partnership to help. If you gift "restricted" interests or securities the IRS allows between a 30% and 50% reduction in the "value" of the gift. That is, you, or someone else, could gift a protion of the partnership valued at $16,000 per year if the the gifted portion were not the controling general interest. If the other family member is married they and their spouse could each gift you about $16k per year of a limited partnership which they have transfered the house to first.
In combination with a delayed sale, rent to own, lease option, etc. you could delay selling the house until next year and then have the family member make a gift of the limited partnership interest this year and next year.
You will need a little bit of help from a lawyer and a CPA to set up the limited partnership, transfer the house, and "value" the gift of the limited partnership interest to you.
You can also transfer part of the limited partnership right away, they contribute the house and you contribute the management, they start with 95% interest and you start with 5%. That should fly without signifigant consequences but ask the CPA.
I am not sure I can answer your questions, however you might find what you need at www.irs.gov
It is usually not the best to make investment decisions based on taxes alone.
You should find an investment that offers the best after tax rate of return.
By investing outside of the USA you are taking on many different risks, (ie currency risk, political etc) in addition to having to file foreign tax returns with their own set of complex rules.