IRS Cracking Down on Real Estate Gifts
I read an interesting post on the American Express OPEN Forum small business website that asserts the IRS has requested sales records from all states in order to cross-reference transfers of gifted real estate with tax filings to ensure the gifts were properly claimed. Penalties can include huge fines (1/3rd the value of the property!) or even criminal prosecution.
Read the full article here.
This helpful heads-up from American Express serves as a reminder of a critical point that I make to every single home buyer and home seller that I work with:
There is nothing “standard” about a real estate purchase or sale. Your specific situation is unique to you. You should always seek advice from a qualified tax advisor or legal professional regarding the potential implications of your purchase or sale.
For tax advice, an attorney (who doesn’t practice tax law) will refer you to an accountant. And an accountant will likewise refer you to an attorney for legal advice. Well, your real estate agent, if a full-time practitioner, is not qualified to dispense tax or legal advice. The Department of Real Estate and our local Realtor Boards pound it into our heads at every bend and turn.
I am aware of many of the more significant taxation and legal issues that affect my field, but the day-to-day realities of my job (marketing homes, showing properties, managing escrows, setting up inspections, negotiating contracts, managing personnel, etc) preclude me from staying abreast of ever-changing IRS tax guidelines and federal/state/local legal codes.
I always do my best to advocate for my clients’ best interests — part of which is only dispensing guidance that I’m qualified to provide. When my clients ask me for legal or tax advice, I always refer them to their accountant or attorney because sending them to a qualified professional who can provide current, complete, and accurate advice is being the best possible advocate!