on parents buying their kids apartments

doctorj · November 2006

escap wrote: Liberal Democrats need to join the effort for reform; otherwise, reform will be in the hands of conservative Republicans, and we definitely don't want that to happen.

My observation of economic reform the last 20 years in the West is that only Liberal/Social Democratic governments can actually get the job done these days. In country after country, fiscal conservatives have their hands tied by their unholy alliance with social conservatives and are reduced to reactionary nibbling around the edges, whereas the center-left can do what needs to be done with a minimum of grumbling from the labor movement. Plus, center-left governments need to stay on their best behavior as far as fiscal responsibility goes, because of the eternal prejudice that they make poor economic managers.

escap · November 2006

In case anyone was wondering, I found out the answer to that tax question. In fact, if you buy an apartment for your kid it is considered a gift and your kid would have to pay around 50% in gift taxes of the amount of the purchase, or of the down payment if that's what you bought for him/her.

The way to avoid this is to "loan" your kid the money, as this is not considered a gift. You can then forgive the loan incrementally over the subsequent years--you're allowed $12K (it's gone up) per year per person, so with two parents you could forgive $24K a year and have a $200K downpayment gift forgiven tax free after around 8 years (half that if you gift half to your kid's spouse). There may be some inheritance implications to all this as well but I can't remember what they were.

Just thought you might want to know, b/c if you just buy your kid an apt and 5 years later he gets audited and owes like $400K in taxes, it won't seem like such a nice gesture anymore. Heads up.

on parents buying their kids apartments

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