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May I loan $150,000.00 to my son and forgive up to 11,000.00 per year on the interest without tax implication to either of us?
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Yes, if the transaction is properly structured and accounted for on an annual basis, you may "forgive" debt up to $11,000 per year per beneficiary and stay within the annual gift-tax exclusion. You'll need a promissory note and then you'll need to provide the beneficiary with annual "gift" letters forgiving up to $11,000 of the loan. Forgiveness applies first to interest accrued and then to principal. The promissory note should have the lowest interest rate permitted for the term of the loan.
| See Also:
The Tax Prophet's Section on Gifts
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I am incorporating myself this year to provide consulting services. Next year, I will be studying for an MBA. Is the tuition for an MBA a tax deduction? It is directly related to a line of business? I'm in -technology and services.
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Possibly. If you need the education to improve your job skills in a job that you currently have, which may include your business, you are permitted to deduct these expenses under the following conditions: Educational expenses may be deducted if they are incurred to maintain or enhance your present skills. You cannot deduct educational expenses if the courses qualify or retrain you for a new trade or profession, or are part of "entry level" education, such as the minimum educational requirements to become a teacher, doctor or attorney. Since an MBA degree is not part of an entry level educational requirement, as long as you can demonstrate you are enhancing your current skills, you should be permitted to deduct the expenses.
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I am interested in adding my son's name to my Deed of Trust without having my property taxes revaluated.
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You will be incurring a gift tax liability if the gift to your son exceeds $11,000. If you are prepared to pay gift taxes on the transaction or utilize your unified estate and gift tax credit (currently $1 million per person), then you can avoid gift taxes on the transaction. You can avoid a Proposition 13 reappraisal under California law if the gift to your child is under $1,000,000. Property transferred from a parent to children normally is subject to reassessment unless it comes under one of two broad exemptions (which generally includes step-children and in-laws) under Proposition 58 (an amendment to Proposition 13): (1) the parent's principal residence, (2) other California real property, but limited to a lifetime aggregate assessed value of $1,000,000.00.
| See Also:
The Tax Prophet's Section on Gifts
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I own three properties in joint tenancy with my same-sex partner. What are the estate-tax consequences?
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If your taxable estate for estate-tax purposes is greater than the estate-tax exemption (currently $1 million), then your estate could have tax liability.
In this situation, non-married couples holding property in joint tenancy should consider severing the joint tenancy and holding the property as tenants in common. With joint tenancy property, the "entire" value of the property is placed in the estate of the decedent, unless the survivor can prove his or her contributions to the asset. Proof of contributions by the survivor is often difficult to obtain.
For example, a mother places her daughter on title to her house as joint tenant with rights of survivorship and then dies. For estate-tax purposes, the entire value of the house is included in the mother's estate, unless the daughter (the survivor) can show that she made contributions to the property, such as payment of some or all of the down payment or subsequent mortgage payments. If the daughter can show that her contributions amounted to 20%, then 80% of the property will be in the mother's estate for estate-tax purposes.
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Loan Forgiveness as a Gift
