How to Transfer Real Property as a Gift

A gift of real estate might be deductible from your taxable income.

There are a number of ways to give a gift of real estate to someone. You might establish a living trust, and instruct the trustee to make the gift. You might transfer title of your personal residence to a nonprofit organization such as a university, and reserve the right to live there until you die. The simplest way to give real property, however, is to make a direct gift. Even when giving a direct gift, however, do not overlook the complexities involved.

Things You'll Need

• Title deed
• Affidavit
• Photo ID
• IRS Form 8283
• Appraisal
• Property tax records
• Title search results
• Property-related documents such as leases

Instructions

1. Research the real estate transfer laws of your jurisdiction to find out if any taxes can be imposed on a gift of real estate. In most jurisdictions, no tax will be imposed as long as the purchase price is zero.

2. Draft an affidavit stating that you are making a gift of real property. Provide the recipient's legal name -- if you are gifting to a corporation, for example, use the corporation's legal name rather than its trade name. Both you and the recipient should sign the affidavit in duplicate, in the presence of a notary public, after presenting photo identification.

3. Provide the recipient with any documents relating to the status of the real estate, such as leases, condominium agreements or restrictive covenants.

4. Conduct a title search on the property at the county land recorder's office and provide the title search report to the recipient. A title search guarantees that you possess marketable title to the property. It requires considerable skill and should be conducted by an experienced real estate attorney.

5. Obtain an appraisal of the property issued by an experienced real estate appraiser and provide it to the recipient, along with a copy of your most recent property tax assessment. This will help the recipient estimate annual property taxes.

6. Prepare a title deed for the property. The deed should contain a legal description of the property -- a street address is not enough. A legal description of the property should appear on your current deed. The deed should state that the purchase price is zero, or that the property was transferred "without consideration." Sign the deed and have the recipient sign it.

7. File the title deed with the county land recorder's office and pay any necessary taxes.

8. Complete IRS Form 8283 and have the recipient sign it, if the recipient is a nonprofit organization qualified under Section 501(c) of the Internal Revenue Code.

9. Deliver possession of the property to the recipient by turning over keys and any other items necessary to allow him to access the property.

10. Deduct the value of the gift from your taxable income on Form 1040, if the recipient is a nonprofit organization qualified under Section 501(c). You may deduct up to a certain percentage of your adjusted gross income, depending on the identity of the recipient. File Form 8283 along with Form 1040.

Tips & Warnings

• It is possible to incur gift tax liability if you transfer real property to anyone other than your spouse or a nonprofit organization. Because of generous exclusions, however, most taxpayers can give up to $1 million in their lifetime without incurring gift tax liability.

References

• Princeton University Office of Gift Planning: Steps for Making a Gift of Real Estate
• Realty Times:Gifts Of Real Estate to Children Not a Good Idea; Benny L. Kass; September 2001
• IRS: Publication 950 -- Gift Tax; December 2009