Financial Services Industry

Passing On A Tax Bill - tax consequences of giving away a rental property - includes information on investment yields - Statistical Data Included

Kiplinger's Personal Finance Magazine, Feb, 2001 by Kevin Mccormally

Q&A | Giving the kids a RENTAL PROPERTY gives them the tax bill on the sale, too.

My wife and I own a beach condo that has been rented out for years and depreciated to zero. We wish to give it to our son and daughter. Will their tax basis be zero or the current market value of the property? Will I have to pay immediate tax on depreciation recapture? Will their tax basis be different if we give them the condo versus their inheriting it after we die? BILL BONINE, Seaford, Del.

When you give away property, you pass your basis on to your children, too. (The basis, however, is probably not zero because you can't depreciate the value of the land on which the building sits.) So your children would be stepping into your tax shoes.

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That means they would have to worry about the tax bill on the profit and depreciation recapture when they eventually sell the place--exactly as you would if you sold the property.

The scenario would be vastly different if your children were to inherit the property. In that case, the basis would be stepped up to the condo's value on the date of death of you or your wife, whoever dies later. If your children sold it for that value, there would be no income tax due and no depreciation recapture.

Kiplinger.com

Updates: For the latest Yields and loan rates, visit the Managing section of our Web site.

Top-Yielding Money-Market Mutual Funds

                             RECENT        MIN.
Taxable                   30-DAY YIELD   INVEST.

1. Strong Investors(*)       6.54%        $ 1000
2. Aon(*)                    6.47         10,000
3. Transamerica(*)           6.42          1,000
4. TIAA-CREF(*)              6.40            250
5. Scudder Premium/AARP      6.36            500
   NATL AVERAGE              6.01%

                            WEB ADDRESS       TOLL-FREE
Taxable                        (WWW.)           NUMBER

1. Strong Investors(*)      estrong.com      800-368-1030
2. Aon(*)                       (#)          800-266-3637
3. Transamerica(*)        transamerica.com   800-892-7587
4. TIAA-CREF(*)            tiaa-cref.org     800-223-1200
5. Scudder Premium/AARP     scudder.com      800-225-5163
   NATL AVERAGE

                                 TAX. EQ. YIELD
                     RECENT         28%/31%         MIN.
Tax-free          30-DAY YIELD      BRACKET       INVEST.

1. Strong                4.22%     5.9%/6.1%       $2,500
2. Vanguard              4.15       5.8/6.0         3,000
3. USAA                  4.07       5.7/5.9         3,000
3. Calvert               4.05       5.6/5.9         2,000
5. Zurich                4.05       5.6/5.9         1,000
   NATL AVERAGE          3.71%     5.2%/5.4%

                    WEB ADDRESS          TOLL-FREE
Tax-free               (WWW.)              NUMBER

1. Strong           estrong.com         800-368-1030
2. Vanguard         vanguard.com        800-635-1511
3. USAA                 (#)             800-531-8448
3. Calvert        calvertfunds.com      800-368-2748
5. Zurich         zurichfunds.com       888-523-4140
   NATL AVERAGE

(*) Fund is waiving all or a portion of its expenses. (#) Rates not available on Web site SOURCE: Money Fund Report, iMoneyNet Inc., One Research Dr., Westborough, MA 01585; 508-616-6600; www.imoneynet.com

Top-Yielding Certificates of Deposit

                                         RECENT        MIN.
6-month                               30-DAY YIELD   INVEST.

1. Capital Crossing Bank (Mass.)         7.00%       $2,500
2. Lighthousebank (Mass.)([dagger])      7.00          NONE
3. Capital One (Va.)                     7.00        10,000
4. Enterprise National (Tenn.)           6.97         1,000
5. Giantbank.com (Fla.)([dagger])        6.91         2,500
   NATL AVERAGE                          5.25%

                                           WEB ADDRESS
6-month                                       (WWW.)

1. Capital Crossing Bank (Mass.)       capitalcrossing.com
2. Lighthousebank (Mass.)([dagger])     lighthousebank.com
3. Capital One (Va.)                      capitalone.com
4. Enterprise National (Tenn.)        enterprisenational.com
5. Giantbank.com (Fla.)([dagger])         giantbank.com
   NATL AVERAGE

                                       TOLL-FREE
6-month                                  NUMBER

1. Capital Crossing Bank (Mass.)      877-976-7722
2. Lighthousebank (Mass.)([dagger])   877-668-2265
3. Capital One (Va.)                  800-564-7426
4. Enterprise National (Tenn.)        901-312-3552
5. Giantbank.com (Fla.)([dagger])     877-446-4200
   NATL AVERAGE

                                         RECENT        MIN.
1-year                                30-DAY YIELD   INVEST.

1. ING Direct (Del.)([dagger])           7.50%         none
2. Cross Country Bank (Del.)             7.34        $5,000
3. Capital One (Va.)                     7.27        10,000
4. E*Trade Bank (Va.)                    7.25         1,000
5. USABancShares.com (Pa.)               7.15           500
   NATL AVERAGE                          5.53%

                                          WEB ADDRESS
1-year                                       (WWW.)

1. ING Direct (Del.)([dagger])           ingdirect.com
2. Cross Country Bank (Del.)          crosscountrybank.com
3. Capital One (Va.)                     capitalone.com
4. E*Trade Bank (Va.)                    etradebank.com
5. USABancShares.com (Pa.)             usabancshares.com
   NATL AVERAGE

                                       TOLL-FREE
1-year                                   NUMBER

1. ING Direct (Del.)([dagger])        800-464-3473
2. Cross Country Bank (Del.)          800-334-3180
3. Capital One (Va.)                  800-564-7426
4. E*Trade Bank (Va.)                 800-382-2651
5. USABancShares.com (Pa.)            877-482-2650
   NATL AVERAGE

                                         RECENT        MIN.
5-year                                30-DAY YIELD   INVEST.

1. Capital One (Va.)                     7.70%       $10,000
2. Eastern Savings (Md.)                 7.25          1,000
3. Discover Bank (Del.)                  7.25         10,000
4. Principal Bank (Iowa)([dagger])       7.20          1,000
5. Giantbank.com (Fla.)([dagger])        7.15          2,500
   NATL AVERAGE                          5.92%

                                           WEB ADDRESS
5-year                                        (WWW.)

1. Capital One (Va.)                      capitalone.com
2. Eastern Savings (Md.)              easternsavingsbank.com
3. Discover Bank (Del.)                  discovercard.com
4. Principal Bank (Iowa)([dagger])        principal.com
5. Giantbank.com (Fla.)([dagger])         giantbank.com
   NATL AVERAGE

                                       TOLL-FREE
5-year                                   NUMBER

1. Capital One (Va.)                  800-564-7426
2. Eastern Savings (Md.)              800-787-2265
3. Discover Bank (Del.)               800-347-7000
4. Principal Bank (Iowa)([dagger])    800-672-3343
5. Giantbank.com (Fla.)([dagger])     877-446-4200
   NATL AVERAGE