Question: I am 28 years old and have been married for two years. My husband and I are planning to start a family. It is so hard for a young couple to afford a house these days, but my father has offered to give us a house that he has rented for the past 15 years. I am very excited about this idea, but one of my father’s friends told him it is best for tax purposes to leave the property to me through his will. This would allow me to sell and avoid any tax. My father is now wavering about making the gift because he thinks the family will benefit more if I inherit and avoid paying the government any tax. A friend of mine who is a financial planner told me that if I plan to make this home my principal residence, I would be able to sell the home after living in it for at least two years and avoid any tax. If my friend is right (we plan to live in the home for a long time), then I think I can convince my father to give me the house now.
Answer: Well, your friend is mostly right. But he is right enough that I don’t see any significant tax reason to delay making the gift.
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