A eax question from the extended falily

[Andreas W.]

2 brothers inherited 50% each of 2 properties of different value. They want to swap their 50% shares so that each brother owns 1 property completely. While the properties are of different values, no money gets exchanged. The question is, does the one brother who gives up the more valuable share have to send a gift tax form to the IRS?

[Michael Plaks]

@Andreas W.

We are brothers, and we inherited half of a $1 MM property, so you own $500k, and I own $500k. And of the second $2 MM property, we each own $1 MM. We both own $1.5 MM apiece, and there's peace in the family.

Now you convinced me to exchange shares, and now you own the $2 MM property, and I own the $1 MM property. And, like you said, no money exchanged hands. Huh? Wait, what just happened?!? I was cool with it because we're brothers, but my wife ain't cool with it at all. Thanksgiving is cancelled.

To answer my own earlier question of what just happened - a gift happened! I just made a huge gift to you, my beloved but cunning brother!

Gifts of this magnitude are reportable to the IRS, although it does not trigger any tax consequences on either of us. At least not while we are alive.