Q: My girlfriend and I would like to purchase a primary residence home and property that is on the market for $2.5 million. There will not be a mortgage as the purchase will be made entirely from her cash assets.
I will not have any personal cash invested in the property, but she and I will each be owners of 50 percent of the property. Are there any tax liabilities for me personally — such as income tax or gift — and if so, what can be done to either limit or eliminate those potential tax liabilities now or in the future.
A: You should understand that your girlfriend is giving you a gift of $1.25 million. If you were married, this wouldn’t be a problem, as husbands and wives can give each other unlimited funds.
But since you’re just dating, it will entirely wipe out her lifetime gift exemption of $1 million, and she may have to pay tax on the additional $250,000 she is giving to you. In any case, she would have to file paperwork with the IRS. This may also trigger a tax event with your state revenue authority.
You shouldn’t have any tax liability, but if you’re looking out for her best interests, you should suggest she immediately speak with her tax accountant and attorney to find some other way of putting you on the title — if indeed that is the best course of action.
Or, you can solve the problem by proposing.
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