Gifting Rental To Son And HeOccupies

[Dan Cox]

Hi,
I have a rental home I purchased as a 1031 exchange. I am going to rent the house for two years...this is apparently a good amount of IRS “seasoning”.

I am then going to gift the home to my son and his wife. They will move into the home as their primary residence.

I understand I have to file gift tax papers. The amount is over the yearly gift allowance but I can deduct from the lifetime gift allowance.

I also understand my son would assume my basis in the property. At this time my tax accountant says the gain tax, should they sell after two years, is about 60K Fed/State.

Assuming not too much appreciation, if they decide to sell, in a couple years..they could buy another primary home and tax wise no issue as long as they bought equal or greater value...or if they sold and didn’t purchase, as of now, the 500K tax gain exclusion would cover any gain.

My question..when I gift to them, through quit claim, do they refinance the property, as owner occupied...the loan is paid off and they have the new loan in their name and I am off title.

What do they/I need to do to make this happen loan/title wise.

Thanks for the time. I hope this is clear as mud!

dan