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If I wish to gift my daughter a single residence that is rented out for $1000/month and my daughter would get the rent money for about 4 years or so, what taxes would I expect to pay on the transfer of the rental residence in her name? And what taxes would she expect to pay when receiving it from me and/or when she would transfer it back to me (and would I need to pay anything on receiving it back under my name?). I am not asking about the rental money just anything related to transferring the asset back and forth.

We are talking about a rental that is outside the U.S.A but I file a 1040 to the IRS each year.

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    What is the reason you wish to transfer ownership of the asset, (and probably only temporarily)? If your goal is to give your daughter money, can you instead retain ownership and just give her the rent proceeds each month? That would be much simpler as you can gift up to $16K per year to a person without even reporting it.
    – TTT
    Commented Apr 8, 2022 at 18:19

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I am going to assume that you only care about the US impacts, and assume that your daughter is also filing US taxes.

If I wish to gift my daughter a single residence that is rented out for $1000/month...

That gift is not a taxable event for your daughter. After she inherits the property, the income, expenses, and depreciation do impact her taxes.

I have to assume that there is no mortgage, because if there was the lender would be very interested in this gift. The bank is an owner and would not want to have a mortgage on a property you no longer own.

...my daughter would get the rent money for about 4 years or so...

Not sure what this means. Unless the general plan is that she would sell it at an undetermined time a few years from now.

...what taxes would I expect to pay on the transfer of the rental residence in her name?

Since the value of the property exceeds the value of the annual limit, you would either pay a gift tax, or have to use some of your lifetime exemption.

.. And what taxes would she expect to pay when receiving it from me...

She wouldn't have to pay any taxes on the gifting only what happens after the gift is received.

Also note that when she sells and calculates the depreciation each year it is based on your initial basis, not a stepped up basis.

..and/or when she would transfer it back to me (and would I need to pay anything on receiving it back under my name?)

Wait. The plan is that in 48 months she will gift it back to you?

Now ignoring that because you have a string attached to this gift it isn't a gift: the transfer will trigger a gift tax on her or a use of part of her lifetime exemption. You wouldn't pay any taxes on the 2nd transfer because you are receiving the gift.

But the sting attached to the first transaction means it was never a gift.

It also seems to be a complicated way to provide a small amount of cash each month, and a tax break for your daughter. If the property has negative cash flow what is the point?

Now you could also be doing this to avoid some taxes, or to be able to say that you don't own property therefore qualifying for some program. You could also be doing this to protect the property from a lawsuit, or something similar.

You have to be careful about doing it for these reasons. Government programs generally have a look back period to prevent a person from gifting all their assets today, applying for the program as a poor person tomorrow, and then getting the gift back the day after the government approves the application. Judges also frown on this type of exchange.

I am also assuming you daughter isn't a minor, because that could complicate these transactions even more.

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    I'd put more emphasis on the "transfer back to me" point up front, as the first half of the answer could be completely irrelevant.
    – chepner
    Commented Apr 8, 2022 at 12:54
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    The daughter is not 'inheriting' the property, so it is an actual gift with implications. The OP should gift the $12k/yr of rental income, and let the daughter inherit the property when the OP dies.
    – Jon Custer
    Commented Apr 8, 2022 at 13:18
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    I would suggest that rather than making OP's asset sheet smaller, the intention could equally well be to make the daughter's asset sheet / income larger (so she could qualify for a car loan, perhaps). Lenders probably don't assume that periodic gifts will continue. That could probably be achieved without all the transfer this way and later transfer back by executing a lease for the 4 years, which would make the daughter legally and provably entitled to the income derived from the property (which would become a sublet) during the lease term.
    – Ben Voigt
    Commented Apr 8, 2022 at 20:35

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