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Message |
whiskers
Guest
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 Posted:
Sun Oct 16, 2005 8:00 am Post subject:
tax planning |
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I sent off a question to a tax planner and the answer is
below. Is this good advice? My only concern is not having
to pay income tax on the $2,000 that i will be giving my
sister. This is going to be her income and not mine. Does
putting the land in a LLC make sense? Should it be written
in the will and filed in my dads name before my dad passes
on or can I do this after his death and put it in my sister
and my name? i would have a lawyer do the LLC filing. Any
idea about how much it would be?
Your question was:
In my dad's will he states that the rent of $3,500.00 that
he receives every month from a gas station that is on his
property be in my name. he also states that i am suppose to
give my sister $2,000.00 every month from that $3,500.00.
How do we make sure that for income tax purposes every year
my sister shows she is receiving $2,000.00 a month and I am
receiving $1,500.00 a month? The land that the gas station
sits on will be in my name only.
You will find the response to your question below:
You will need to put the property in an LLC (probably before
dad passes) and then you should inherit the majority of the
LLC and your sister could inherit a small percentage. Then
you can specify (in advance) how much each of you should
receive from the profit of the LLC.
The LLC will help with liability limitation as well.
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Harlan Lunsford
Guest
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| Posted:
Mon Oct 17, 2005 6:18 am Post subject:
Re: tax planning |
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whiskers wrote:
| Quote: | I sent off a question to a tax planner and the answer is
below. Is this good advice? My only concern is not having
to pay income tax on the $2,000 that i will be giving my
sister. This is going to be her income and not mine. Does
putting the land in a LLC make sense? Should it be written
in the will and filed in my dads name before my dad passes
on or can I do this after his death and put it in my sister
and my name? i would have a lawyer do the LLC filing. Any
idea about how much it would be?
Your question was:
In my dad's will he states that the rent of $3,500.00 that
he receives every month from a gas station that is on his
property be in my name. he also states that i am suppose to
give my sister $2,000.00 every month from that $3,500.00.
How do we make sure that for income tax purposes every year
my sister shows she is receiving $2,000.00 a month and I am
receiving $1,500.00 a month? The land that the gas station
sits on will be in my name only.
You will find the response to your question below:
You will need to put the property in an LLC (probably before
dad passes) and then you should inherit the majority of the
LLC and your sister could inherit a small percentage. Then
you can specify (in advance) how much each of you should
receive from the profit of the LLC.
The LLC will help with liability limitation as well.
|
Yep. Good advice.
Remember, as it stands now, with the property in your name
only, you only are entitled to the rent and therefore any
gift to your sister is not deductible from your income.
See a local attorney.
ChEAr$,
Harlan Lunsford, EA n LA
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
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123go
Guest
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| Posted:
Mon Oct 17, 2005 6:37 am Post subject:
Re: tax planning |
|
|
"whiskers" <whiskers222@hotmail.com> wrote:
| Quote: | I sent off a question to a tax planner and the answer is
below. Is this good advice? My only concern is not having
to pay income tax on the $2,000 that i will be giving my
sister. This is going to be her income and not mine. Does
putting the land in a LLC make sense? Should it be written
in the will and filed in my dads name before my dad passes
on or can I do this after his death and put it in my sister
and my name? i would have a lawyer do the LLC filing. Any
idea about how much it would be?
Your question was:
In my dad's will he states that the rent of $3,500.00 that
he receives every month from a gas station that is on his
property be in my name. he also states that i am suppose to
give my sister $2,000.00 every month from that $3,500.00.
How do we make sure that for income tax purposes every year
my sister shows she is receiving $2,000.00 a month and I am
receiving $1,500.00 a month? The land that the gas station
sits on will be in my name only.
You will find the response to your question below:
You will need to put the property in an LLC (probably before
dad passes) and then you should inherit the majority of the
LLC and your sister could inherit a small percentage. Then
you can specify (in advance) how much each of you should
receive from the profit of the LLC.
The LLC will help with liability limitation as well.
|
that advise seems to contradict your dad's intentions. You
should speak with his estate planning attorney and get it
done right, and perhaps clarify your dad's thinking in the
process. It seems to me title should pass to you, with a
life estate to your sister, or perhaps a mortgage to your
sister. How long does your dad want your sister to get the
$2000 per month? Until she dies? Forever (i.e. her heirs
continue to get $2000 per month)? Until you sell the
property, at which time she gets what, if anything? What
happens if the gas station closes and there is no income,
does she still get something, perhaps when the property
sells? What happens if the gas station closes and you lease
the property to another type of business? How old is your
sister? Does your dad think she should be getting only
$2000 per month 30 years from now, or should it increase
over time?
or, perhaps the land should pass to you, and the building to
your sister. You will provide a ground lease to your sister
for $1500 per month, and she will rent the ground and the
building to the gas station for $3500 per month. But then,
many of the above questions still apply.
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
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whiskers
Guest
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| Posted:
Tue Oct 18, 2005 1:53 pm Post subject:
Re: tax planning |
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|
in the will it states that my sister is to get the $2,000 a
month until her death. My sister is 47 and i am 44. if
there is no income from the property she does not receive
any income. my dad wishes are for me to own the land and
help my sister out my giving her a monthly income from it.
My concern is i do not want to have to show that extra
$2,000 a month income on my taxes every year that i am not
receiving. When I start getting this income my yearly
income will be about $50,000 a year. So does that put me
in the 25% tax bracket? i am single and so is she. My
sister will be in a lower tax bracket then i will be. It
would just seem more sense to have her pay her part of
the income tax since she is in a lower bracket.
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >> |
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whiskers
Guest
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| Posted:
Tue Oct 18, 2005 1:53 pm Post subject:
Re: tax planning |
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|
also why would it be better to put this property in a LLC
before my dad passes as opposed to after?
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >> |
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Stuart A. Bronstein
Guest
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| Posted:
Wed Oct 19, 2005 8:00 am Post subject:
Re: tax planning |
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|
"whiskers" <whiskers222@hotmail.com> wrote:
| Quote: | in the will it states that my sister is to get the $2,000 a
month until her death. My sister is 47 and i am 44. if
there is no income from the property she does not receive
any income. my dad wishes are for me to own the land and
help my sister out my giving her a monthly income from it.
My concern is i do not want to have to show that extra
$2,000 a month income on my taxes every year that i am not
receiving.
|
If that's what the will says, he really didn't give you the
property outright. Really, he gave it to you, partly for
your sister, in trust.
My suggestion is to have the probate court establish a
formal trust. That way the income that comes out will be
taxed to the one who receives it.
Stu
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >> |
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123go
Guest
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| Posted:
Wed Oct 19, 2005 8:00 am Post subject:
Re: tax planning |
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|
"whiskers" <whiskers222@hotmail.com> wrote:
| Quote: | in the will it states that my sister is to get the $2,000 a
month until her death. My sister is 47 and i am 44. if
there is no income from the property she does not receive
any income. my dad wishes are for me to own the land and
help my sister out my giving her a monthly income from it.
My concern is i do not want to have to show that extra
$2,000 a month income on my taxes every year that i am not
receiving. When I start getting this income my yearly
income will be about $50,000 a year. So does that put me
in the 25% tax bracket? i am single and so is she. My
sister will be in a lower tax bracket then i will be. It
would just seem more sense to have her pay her part of
the income tax since she is in a lower bracket.
|
based on these statements, it sounds like the advice you
received from the tax planner is definitely wrong, since
under his plan your sister will own part of the land.
It sounds like your sister should receive a life estate to
the extent of $2000 per month rental income (but only if
rent is received), or possibly 57% ($2000/$3500), so her
income will increase as rental income increases (you and
your sis are still pretty young). Need to also consider who
pays any taxes, upkeep, and other expenses.
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >> |
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Stuart A. Bronstein
Guest
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| Posted:
Wed Oct 19, 2005 8:00 am Post subject:
Re: tax planning |
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|
"whiskers" <whiskers222@hotmail.com> wrote:
| Quote: | also why would it be better to put this property in a LLC
before my dad passes as opposed to after?
|
If he's still alive, he should set up an estate planning
trust right now. That's the easiest, most flexible way to
deal with this. That would also avoid probate.
Stu
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >> |
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Corwin
Guest
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| Posted:
Sun Oct 23, 2005 9:45 pm Post subject:
Re: tax planning |
|
|
"whiskers" <whiskers222@hotmail.com> wrote:
| Quote: | Your question was:
In my dad's will he states that the rent of $3,500.00 that
he receives every month from a gas station that is on his
property be in my name. he also states that i am suppose to
give my sister $2,000.00 every month from that $3,500.00.
How do we make sure that for income tax purposes every year
my sister shows she is receiving $2,000.00 a month and I am
receiving $1,500.00 a month? The land that the gas station
sits on will be in my name only.
|
One problem is that you're interpreting what the will says and
posting that here, rather than the text of the actual provision
in the document.
This almost definitely isn't what the will says. Once your
dad passes on and you inherit the asset any income it
generates is your property.
Your dad can't (validly) put an instruction in his will dictating how
you are to handle that income. He couldn't state in his will that I
would inherit the Grand Canyon, could he? He doesn't own the Grand
Canyon, and so can't bequeath it. People do that stuff all the time;
it doesn't matter what's in the will; a person can only bequeath
property they own. After he's gone he doesn't own the future income
stream from the gas station, you do, and so any provision dictating
how it should be handled is disregarded.
If in fact the will was improperly drafted, your dad definitely needs
to get a more experienced estate planning attorney. He needs to have
a trust drafted to accomplish his goal; an LLC or family limited
partnership (FLP) may or may not be good alternative choices depending
on other factors. Also, it's going to be a big mess when the court
takes a look at that provision and realizes it's invalid. Courts
don't like to interpret imporoperly drafted wills; it's a better
choice to just invalidate them and have the estate go through
intestacy. |
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Shyster1040
Guest
|
| Posted:
Mon Oct 24, 2005 8:00 am Post subject:
Re: tax planning |
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|
""This almost definitely isn't what the will says. Once
your dad passes on and you inherit the asset any income it
generates is your property.
Your dad can't (validly) put an instruction in his will
dictating how you are to handle that income.""
It's true that the actual language of the will (and not a
paraphrase) will determine the outcome; however, I would not
be so quick to jump the gun and say that dear ole Dad can't
put restrictions on the income from the gas station. Dad
owned the right to receive the rent paid by the gas station,
and, as a general matter, could very well have devised that
right with the limitation that a part of it be given over to
someone other than the devisee - that's what a trust is -
person A gives legal title to property to person B with
instructions that some (or all) of the income from the
property be transferred to person C. As a general matter,
the failure to draw up an orthodox trust indenture is not
per se fatal to the creation of the trust.
However, this is a matter for a trust & estates lawyer in
your state to give you advice on after he/she has seen all
of the relevant documents - it is not a tax question.
Once you know exactly what sort of relationship your
father's will created between you, the income stream, and
your sister, then you'll be able to get a better sense of
how the income should be reported for tax purposes.
As a general matter, however (the IRS has publications that
cover the basics of tax reporting for trusts), if the
arrangement between you, your father (via his will) and your
sister is treated as a trust, then there may be a fiduciary
return you would be required to file reporting the amount of
the income and the distributions to your sister. She would
then report her portion of the income on her own return.
However, this is just a very generalized picture, and the
actual result will depend in the first instance on what this
arrangement actually is under state law. Once you know that
you'll know how to treat it for tax purposes.
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >> |
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