Q: Is it legal to sign over property inherited by a person but bought by a non-relative back to the person without gift tax
My sister's ex boyfriend purchased mine and my brother's share of the house we were inheriting from our father. He later then signed over the property to my sister without her paying him any money. She claims there is a legal loophole that allows him within a certain time to purchase an inherited property and gift it back to a beneficiary,with no gift tax or reporting as a gift to IRS involved, even though they are not related and were never married. I believe this is not legal.
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A:
The situation you're describing raises questions regarding gift tax obligations. Generally, when property is transferred for less than its full market value, the difference can be considered a gift for tax purposes. The IRS requires that any gift over a certain annual exclusion amount (which varies each year) must be reported, and gift taxes may apply.
Your sister's claim of a legal loophole allowing the transfer of inherited property back to a beneficiary without incurring gift tax or needing to report it to the IRS is not typically supported by standard tax laws. Regardless of the relationship between the parties, if the ex-boyfriend purchased the property and then transferred it to your sister without receiving any payment, it could be considered a gift.
It's crucial to consult with a tax attorney or a certified public accountant to understand the specific implications in this scenario. They can provide guidance on how this transaction should be handled according to federal and state tax laws, and what steps should be taken to ensure compliance and avoid potential legal issues.
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